SOLUTION: knowledge of contract law to a range of business

Apply a knowledge of contract law to a range of businessactivities including situations where a contract isunenforceable (LO2)• Contract law, agency and the sale of goods• Offer and acceptance, consideration, intention andprivity• Terms of a contract in common law• Terms of a contract for the sale of goods and services• Defects in a contract; misrepresentation, mistake,duress, undue influence and other defects• Discharge of a contract• Remedies for a breach The law of contract defines the circumstances when apromise or promises are enforceable. Is a branch of civil law that deals with interpretation andenforcement of contracts between two or more parties is a body of law that governs, enforces, and interpretsagreements related to an exchange of goods, services,properties, or money agreement made between two or more people orbusiness entities, in which there is a promise to dosomething in return for a gain or advantage, is legallybinding Promises to be initially enforceable as a contract certainelements must be present, there must be: agreement, constituted by a corresponding offer andacceptance, supported by consideration, being the mutual exchange of somethingwhich the law recognises as having a value and an intention to create legal relations An offer may be addressed to a single person or to manypeople In the absence of a contract, neither party will be bound tothe tentative promises or agreements they have made It is importance to determine whether or not a contract hasbeen formed Buying a jar of coffee Using a taxi Going to the cinema Opening a bank account Travelling by bus Buying fuel (e.g petrol or diesel) Signing up to a mobile phone contract Signing up to a university course Getting your hair cut Using the internet in a café or library Buying a sandwich Bilateral contracts occur when each party takes on some sort of obligationusually promising to do something in return for apromise to do something by the other party. Example: I promise to give you £20 and you promise towash my car (two promises). Most contracts are bilateral As a unilateral contract, by definition, involves apromise by one party only it follows that it generates anobligation for one party only typical unilateral contract would be the offer of a rewardfor the return of lost property. The only obligation it creates is upon the offeror to paythe stipulated reward to any person who chooses toperform the stipulated act (i.e. return the lost property) An offer is an expression of willingness tocontract on certain terms. must be made with the intention that it willbecome binding upon acceptance There must be no further negotiations ordiscussions required may take the form of a statement (either oral orwritten), or it could be made by conduct that iscapable of accepted. can be made to one particular person, a groupof people, or to the world at large An invitation to treat is an indication of awillingness to do business. Is an invitation to make an offer or tocommence negotiations Courts have considered whether or not acommunication was an offer or an invitation totreat in a wide variety of circumstances Examples where courts have found that the communication was not an offer but aninvitation to treat A display of goods is generally an invitation totreat. Pharmaceutical Society v Boots [1953] 1 QB 401 Fisher v Bell [1961] 1 QB 394. In contrast, where the display is made by amachine, the display will probably be an offer(Thornton v Shoe Lane Parking [1971] 2 QB163). An advertisement is an invitation to treat wherea bilateral contract is anticipated. See Partridge v Crittenden [1968] 2 All ER 421 –the advertisement of a bilateral contract Where, as in Carlill v Carbolic Smoke BallCompany [1893] 1 QB 256, a unilateral contractis contemplated the advertisement may be anoffer. The Carbolic Smoke Ball Co placed ads innewspapers offering a reward of £100 to anyperson who used the smoke ball three timesper day as directed but still contractedinfluenza, colds, or any other disease. To provethey were serious, a substantial sum of moneywas deposited in an account.• This was not an invitation to treat, but aunilateral offer.• Mrs Carlill, who caught flu, was entitled todamages• To decide if an advert is or is not an invitationto treat the courts:• will look at what the advertiser’s intentionswere• and how would a reasonable person interpretwhat was said in the advert An offer can be terminated, or brought to an end, invarious ways: Rejecting an offer and making a counter offer An offer is terminated if it is rejected. It is also terminated if the offeree tries to vary theterms of the original offer e.g. by offering less moneyof trying to change the subject matter of the contract(this is known as a counter offer). Hyde v Wrench (1840) But a statement requesting further information will notconstitute a counter-offer. Stevenson v McLean (1880) Withdrawal of offer, provided it was communicated byofferor The offeror may withdraw or revoke his offer at anytime before acceptance by the offeree. However, to be effective this must be brought to theattention of the offeree before acceptance. An offer cannot continue indefinitely – once withdrawnit cannot be accepted. Routledge v Grant (1828) Death of offeror (relevant only in contracts for personalservice) If the offeror dies and the offer involved personalservices, the offer terminates on his death. If the offerinvolved non-personal services, it might survive if itcan be performed by the offeror’s personalrepresentatives. For contract to be formed there be acceptance of theoffer It is up to the person making the offer to stipulate howit should be accepted An acceptance must be the ‘mirror image’ of the offer(otherwise it will be a counter-offer). It is theunconditional agreement by the offeree to all the termsof the offer The acceptance must also be firm (i.e. unconditional)and must be communicated to the offeror (otherwisehow will he know that an agreement has been formed?)• The general rule of acceptance is that it must becommunicated in writing, verbally, or byconduct to the offeror and received by himbefore it is effective. Entores v Miles Far East Corp (1955) andreaffirmed by the House of Lords in Brinkibonv Stahag Stahl (1983). As a general rule, communication means that theofferor has received the acceptance and is aware of it “Suppose, for instance, that I shout an offer to a manacross a river or a courtyard but I do not hear his replybecause it is drowned out by an aircraft flying overhead.There is no contract at that moment. If he wishes tomake a contract he must wait until the aircraft is goneand then shout back his acceptance so that I can hearwhat he says. Not until I have his answer am Ibound….”~Per Denning LJ in Entores v Miles Far EastCorp [1955] 2 QB 327. The Postal acceptance rule is complete when posted. –puts the risk of delay and loss on the offeror is an exception to the general rule requiringcommunication Will prevail where use of the post was reasonablycontemplated by the parties or stipulated by the offeror.See Household Fire Insurance v Grant (1879). It may be that the post is the only reasonable form ofcommunication available. See Henthorn v Fraser [1892] The postal acceptance rule will not allow acontract to be concluded by posting theacceptance where the letter is incorrectlyaddressed by the offeree see LJ Korbetis v Transgrain Shipping BV [2005]EWHC A contract can be formed such as a fax or anemail◦ (see, for example, Allianz Insurance Co-Egypt vAigaion Insurance Co SA [2008]What about making a contract through web sites?• The Electronic Commerce (EC Directive)Regulations 2002 state that electronicorders/acknowledgements of orders “aredeemed to be received• when the parties to whom they are addressedare able to access them”• Websites are usually considered to be shopwindows = invitations to treat• The offer is made by the purchaser and theseller has the option to reject• Where an agreement is made on the internet theservice provider must electronicallyacknowledge receipt• Acceptance depends upon the wording on theelectronic communication sent back to thepurchaser• It may be when the seller accepts the order orwhen he dispatches the goods• Contract made on-line is considered to be inwriting• An electronic signature is acceptable If a lot is put up for sale to auction ‘without a reserve’ ,this amounts to the offer of a unilateral contract by theauctioneer promising that the highest genuine bid willbe accepted Advertising that an auction will be held without reservedoes not amount to definite offer that the auction willbe held or that any of the lots will be put up for auction Harris v Nickerson (1873) Contract law exists to enforce the parties’ bargains – ifthe parties never intended the agreement to have legalforce, there cannot be a contract consider the difficulties in proving what a party actuallyintended when he made an agreement – and how easy itmight be to claim no legal intention if a contractbecomes inconvenient at a later stage For this reason, the courts have developed somepresumptions about where legal intention is likely to bepresent particularities The presumption here is that there is no legalintention – but it can be rebutted. Courts willlook at the context, the content and thecertainty of the agreement. Balfour v Balfour [1919] 2 KB 571 Merritt v Merritt [1970] 1 WLR 1211 Jones v Padavatton: A resident of England invited her daughter who lived and worked in theUnited States to move to England to study. They agreed that the motherwould let the daughter stay in the house rent free. A dispute arose andthe mother brought an action to evict the daughter from the house. The court found for the mother in that there was no legally bindingagreement between the parties regarding the offer to live in the house inreliance on the presumption that family members do not intend to enterinto legal relations. This was the case, notwithstanding the seriousnessand Here the presumption is the opposite – that theparties did have legal intention. There must beclear evidence to rebut this presumption. Jones v Vernon’s Pools Ltd [1938] 2 All ER 626 Carlill v Carbolic Smoke Ball Co [1893] 1 QB256 Esso Petroleum v Commissioners of Customs &Excise [1976] 1 ALL ER 117 What is consideration? English law does not enforce gratuitous promises. A promise must be backed up by consideration if thereis to be a contract. In Currie v Misa (1875), consideration was defined assomething that constitutes a benefit to one party or adetriment to another and this was affirmed by theHouse of Lords in Dunlop v Selfridge (1915) where itwas described as: “An act of forbearance or the promise thereof is theprice for which the promise of the other is bought, andthe promise thus given for value is enforceable.” There are two types of consideration Executory – a promise to perform an act at some future date Example I will clean your windows next week if you pay me fivepounds Executed – a promise which only becomes enforceable when theofferee actually performs the required act – see unilateral contractsand Carlill v Carbolic Smokeball Co (1891) Performance must be legal-a promise to pay for an illegal act is notenforceable. Performance must be possible A promise to perform an impossible act is clearly unenforceable. A number of rules should help you remember how courtsdetermine whether consideration is present in particular scenarios. Past consideration is not good consideration If valuable benefit has already been given, before the contract isentered into, then this is not valid consideration and there will beno contract. Re McArdle (1951)-A wife and her three grown-up children livedtogether in a house. The wife of one of the children did somedecorating and later the children promised to pay her £488 andthey signed a document to this effect. It was held that the promise was unenforceable, as all the work hadbeen done before the promise was made and was therefore pastconsideration Where a party already has an existing duty to performan act, he will not be able to enforce a promise made tohim in return for performing that act. Collins v Godefroy ([1831] Godefroy promised to pay Collins if Collins wouldattend court and give evidence for Godefroy. Collins hadbeen served with a subpoena (a court order tellingsomeone they must attend). Collins sued for payment. Itwas held that as Collins was under a legal duty to attendcourt he had not provided consideration. His actiontherefore failed. Glasbrook Bros. Ltd v Glamorgan C.C. [1921] A.C. 270): The defendants, owners of a coal mine, requested police presenceduring a strike. The plaintiffs, the police, offered a visiting patrolservice, which they believed would be adequate. The defendantswere concerned about site safety and decided that they wanted astationary onsite presence and agreed to pay for this service. Thedefendants refused to pay on the grounds that the police wereperforming their duty to keep the peace. ISSUE: Was performance of a public duty sufficient consideration? HELD: The police had gone beyond their existing duties and therefore, thedefendant should pay for the services rendered. is a common law doctrine which provides that acontract cannot confer rights or imposeobligations upon any person who is not a partyto the contact. This doctrine provides that only the parties to acontract can enforce the contract A friend of yours a market trader, has always boughthis goods from wholesaler. Your friend has heard thatgoods can sometimes be bought very cheaply atauction, and would like to know the legal positionwhen buying these way: Explain to your friend How a contract is made The difference between an offer and a treat The offer and acceptance position when buying byauction The extent to which offers can be withdrawn after theyhave been madeApply a knowledge of contract law to a range of businessactivities including situations where a contract isunenforceable (LO2)• Terms of a contract for the sale of goods and service• Defects in a contract; misrepresentation, mistake,duress, undue influence and other defects• Discharge of a contract• Remedies for a breachMacIntyre Seventh Edition- Business Law: Chapter 3- Formation of contracts -offer andacceptance Chapter 4-Other requirement of a contact –intention to create legal relations,considerations, formalities and capacity Chapter 6- Misrepresentation –mistake,duress an undue influence Chapter 7 –Discharge of liability , remedies forbreach of contract Adams, A. (2018), Law for Business Students, Harlow,Pearson Brownsword, R. Smith & Thomas, (2015), A casebook oncontract. 13th edition, London: Sweet & Maxwell Burrows, A (2016). A casebook on Contract Fifth EditionOxford, Hart Publishing Halson, R. (2013), Contract law, Second edition, Harlow:Pearson MacIntyre, E. (2018), Business Law, Harlow, Pearson Poole, J. ( 2016), Casebook on Contract Law, Thirteenthedition, Oxford, Oxford University Press