Business Law The Law of Contract

Task One

The Law of contract

For a contract to be made there are several elements to consider;

Offer and acceptance; An offer is made when one party makes it clear, through words or actions, that he is prepared to be bound as soon as that offer is accepted by the person to whom it is made. This is otherwise referred to as a “meeting of the minds.” There are also contracts that start with an “invitation to treat” which is "an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed." An example of this is when there is a display of goods in a shop window, or on shelves in a self service shop an example of invitation to treat can be shown by the case of the Pharmaceutical Society V Boots (1953), Boots was the first self service chemist in the country. The Pharmaceutical society argued that the law states that there must be a pharmacist present at the sale of certain drugs. It was found that the contract takes place at the till where there was a Pharmacist. Therefore the drugs on the shelves were invitation to treat.

An acceptance can only be a feature of a contract if that acceptance is communicated to the offeror. (Unless a postal rule is used). Silence cannot be used as a sign of acceptance to an offer. For example in the case of Felthouse v Bindley (1863) where the nephew of plaintiff had a horse to sell, after some negotiations they could not agree as to price and the horse was not sold; Afterwards the plaintiff wrote to his nephew, making an offer for the horse, stating in his letter that he should consider it a deal if he did not hear to the contrary. His nephew did not reply, and the horse was sold by mistake, the auctioneer having had instructions from the nephew not to sell it. After the sale the nephew wrote to plaintiff the contents of which letter showed that he intended to accept his uncle's offer: As there was no memorandum in writing binding the nephew at the time of the sale, and no evidence that he had at that time accepted the offer, no contract had been made.

There can however specify the method by which acceptance is communicated. In the case of

Eliason V Heshaw (1819) the buyer approached the seller in order to buy some flour. The terms were that the buyer would purchase a quantity of flour for a set price. The original offer was made by letter on February 10th, 1813. In a postscript the letter stipulated that an acceptance was to be made by letter on the "return wagon" . Upon receiving the offer, the seller posted a response, by mail, the following day, the 19th of February. The buyer acknowledged receipt of the letter on the 25th of February, stating that "as we requested answer by return of the wagon the next day, and as we did not get it", they would not complete the original contract, and mailed the letter to the seller. In the interim the flour was shipped to the buyer, who then refused to pay for the shipment, and would not take delivery. The seller then sued for damages for the sent flour. An acceptance of an offer, if it changes the terms of the original offer, must be agreed to by the offeror in order to create a binding contract. In this case the changing of the destination to which the acceptance was to be posted, even though it was only accepting the original terms, constituted a counter-offer, which was not accepted by the buyers of the flour, leading to no contract actually being created.

Consideration; is an element of swop or exchange within the contract, or otherwise known as “the price of a promise.” Consideration must be of some value, usually monetary, however the swop does not need to be of equal value. An example of consideration is seen in the case of Thomas v Thomas (1842) where In this case the court reviewed an oral promise made by a man on his death bed which was contrary to the terms of his will. The executors gave effect to those wishes by putting the spouse of the deceased plaintiff in possession of the home. It was held that there was not “valid consideration” to make the promise enforceable. “Motive is not the same thing as consideration. Consideration means something which is of some value in the eye of the law, moving from the plaintiff.”

However, the consideration must be clearly linked to the promise, anything pit forward as consideration which is finished is generally unacceptable. For example in the case of Eastwood v Kenyon where the guardian of a girl got a loan to educate the girl and improve marriage prospects. After the marriage, her husband promised to pay off the loan however it was held that the guardian couldn’t enforce the promise as taking out the loan was past consideration and was completed before the husband had to repay it.

On the other hand there is a special and limited exception to the rule requiring the consideration to be given in exchange for an undertaking not to enforce a debt this is also known as “equitable estopple” literally meaning to stop going back on a promise. In the case of Hughes v Metropolitan Railway a landlord was entitled, under the terms of a lease, to compel a leaseholder to carry out repairs to the property, given an adequate period of notice. The landlord gave a six month notice period but, during this time the landlord and leaseholder entered into negotiations over the sale of the land. The leaseholder was given to understand that the repairs need not be carried out if he was going to purchase the land. When the negotiations broke down, the landlord attempted to enforce the original six-month period and evict the tenant. The court ruled that the negotiations over the sale constituted a promise not to enforce the repair order, and that the tenant had acted on that promise to his detriment. The principle of promissory estoppel could therefore be used to stop the landlord enforcing these rights.

But the concept of “estopple” can only be used as a defence, not as an attack as because equity is based on fairness it is also discretionary (in some instances it would not be fair to enforce the riles). This is based on a number of rules and principles
1) The person using the equity must be blameless
2) Equity can only be used as a defence

In the case of Combe v Combe (1851) Mr and Mrs Combe were a married couple and Mr Combe had promised Mrs Combe that he would pay her an annual maintenance. Their marriage eventually ...

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In the case of Combe v Combe (1851) Mr and Mrs Combe were a married couple and Mr Combe had promised Mrs Combe that he would pay her an annual maintenance. Their marriage eventually fell apart and they were divorced. Mr Combe refused to pay any of the maintenance he had promised. Seven years later Ms Combe brought an action against Mr Combe to have the promise enforced. There was no consideration in exchange for the promise and so no contract was formed. Instead, she argued promissory estoppel as she had acted on the promise to her own detriment.

Intention to be bound; no contract will be enforce unless it is clear that the parties intended to be legally bounded by there agreement. It is presumed that this is the intention in normal commercial contract. In the case of Balfour v Balfour (1919) Mr Balfour had agreed to give his wife £30 a month for maintenance while he was living abroad. Once he had left, they separated and the payments stopped. Mrs Balfour brought in action to enforce payments however the Court held that there was no enforceable agreement as there was not enough evidence to suggest that they were intending to be legally bound to the promise.

The need for certainty in the contract; In addition to the elements above the courts will not enforce any contract unless it is also sufficiently clear and complete for example in the case of Guthing V Lynn (1831) Regarding the warranty of a horse, the plaintiff said he would purchase the horse for £63, and, “if the horse was lucky, would give defendant £5 more, or the buying of another horse” The court ruled that the conditional promise omitted in the declaration being too vague to be legally enforced, and not amounting, in point of law, to a promise.

According to contract law therefore, there was definitely a contract between Petra and Spit and Polish cleaners. Therefore the case that we need to argue for Petra is the possibility of breach of contract or even misrepresentation of the contract.

Petra’s Case

Re. Suit

Petra’s case here is regarding the supply of goods and services and calling into question the reasonable care and attention to the suit which she took in to be cleaned at Spit and Polish dry cleaners.

Richards Defence

Richard as the defendant is likely to say that even if he was responsible for the damage to the suit in the contract and also for the burn, and the negligence that lead to the fall, he has excluded liability through the signs such as “we accept no liability for any loss or damage caused”

In order to use the exclusion clause effectively he would have to consider what makes an exclusion clause valid.

Exclusion Clause

In a contract, an exclusion clause is a term that limits the liability of one or another party, if there is an event of there being some problem with the performance of the contract.
For an exclusion clause to be enforced, certain conditions must be met such as;

It must be validly incorporated into the contract and its meaning must be claie and match the nature of the defense to which it is to be put.
It must not be prevented by statute
The contract must remain intact that the clause has some legal force.

Is the Exclusion Clause valid?

As it must form a part of the contract, all parties must be aware of it. This is usually by a signature on a contract. It is not usually possible to go against an exclusion clause to which the accusing party has put a signature on the grounds that they did not see the clause. For example in the case of Lestrange v Graucob (1934) Mrs L'Estrange owned a cafe. She ordered a cigarette machine from the manufacturers which, it turned out, never worked properly. Although an implied contract term in the sale of goods is that the goods will be suitable for the purpose intended, the contract -- which Mrs L'Estrange had signed -- did state that the manufacturers disclaimed all liability regarding the malfunction of the machine. It was held that Mrs L'Estrange could not claim damages on the grounds that she ``did not see'' the clause in the contract. There was no evidence of fraud or misrepresentation that might have mitigated this judgment.

If the contract is not “explicit”, the exclusion clause can be incorporated if the party that is affected is given adequate warning of the fact. In general this needs to be done before, or at the time of, making the agreement. For example, Olley V Marlborough Court Hotel 1949 Mrs. Olley and the Hotel had made a contract for the rent of a room at reception. Mrs. Olley had a possession stolen from the room. The Hotel tried to defend the ensuing claim for damages on the bases that there were notices in the bedrooms disclaiming liability for thefts. The court ruled that the contract was formed at the reception desk and that Mrs.Olley couldn’t have known the Hotels policy.

Standard terms and conditions can be incorporated into a contract. For this to be enforceable, certain precautions must be taken:

Notice must be given before creating the contract. In the case of Thornon v Show Lane Parking (1971) Mr Thornton parked his car in a commercial car park. The car park did display a sign to the effect that cars were parked at the owner's risk. Mr Thornton that was injured in the car park. The car park's terms of business were printed on the back of the ticket issued from the ticket dispenser but, it was ruled, this did not form part of the contract as the contract was concluded before the ticket was issued. The notice on the building was deemed insufficiently precise to allow a disclaimer of liability for injury.
The terms must intended to have a contractual effect In the case of Chapelton v Barry Urban District Council 1940 Mr Chapelton and his girlfried hire deck-chairs for the beach at Barry, at a cost of tuppence (two imperial pence). The deck-chair attendant gave Mr Chapelton a piece of paper in receipt. On the paper was a term disclaiming liability for personal injury. Mr Chapelton's deck-chair collapsed, as he had injured his back, he made a claim for damages against the Council. The court held that the paper issued to Chapelton was merely a receipt, not a contract. Another example of this is that of McCutcheon v MacBrayne 1964 here, Mr. McCutcheon had asked his brother –in-law, Mr.McSporron to send his car to Islay on MacBrayne’s ferry. The ferry sank. Defending the claim for damages, McBrayne claimed that its conditions of business were displayed at the port, and were printed on its receipts. However, the court ruled that the contract was made by telephone, before McSporron had chance to see the terms. The receipts issued were not contractual documents. MacBrayne argued that it had done business with McSporron before and he ought to have known the terms. However, the court ruled that these dealings, although regular, were not of a sufficiently consistent nature to claim incorporation by prior business.
If the contract terms are implied then reasonable attempts have been made to alert the affected party to the existence of exclusions for example in the case of Parker v South Eastern Railway (1877) Parker gave his bag worth £24.50 to a cloakroom where he was given a ticket with a number and clauses on the back on the front it said “see back”. One of the clauses on the ticket stated that the goods only insured up to the value of £10 and the bag was stolen. The Jury found that Parker hadn’t read the ticket and was under no obligation to do so. Petra’s attention had also not been pointed to any other terms of the contract.. In general, the more profound the terms of the exclusion clause, the more effort that must be given to alert the other party.

However, the use of an exclusion clause can be supported by prior dealings between the parties. For this to be supported it needs to be “regular” and “consistent.” For example in the case of Spurling v Bradshaw (1956), Bradshaw regular contract Spurling to store materials; on one occasion some barrels of orange juice were damaged by the latter's negligence, so Bradshaw refused to pay. When sued for payment, his defence was that Spurling's exclusion clause was unknown to him, and could not form part of the contract. Spurling were able to show that Bradshaw had received many accounts from them in previous business, and would have had the opportunity to read the terms of business. This argument was upheld by the court, and the exclusion clause was allowed to stand.

If there is any ambiguity or uncertainty as to the meaning of an exclusion clause the court will construe it contra proferentem, for example against the party who inserted it in the contract. This is illustrated by the case of Houghton v Trafalgar Insurance Co (1954). The plaintiff's motor insurance policy provided that the defendant insurers would not be liable, if the plaintiff carried an "excess load". The plaintiff had an accident while carrying six people in a car that seated 5. The Court of Appeal held that the term "excess load" could mean either too many people or too much weight. It was given the latter meaning, which meant that the defendants were liable on the policy.

The Section 6 of the Unfair Contract Terms Act of 1977 states:

“(1) Liability for breach of the obligations arising from—
(a) section 12 of the Sale of Goods Act 1979 (seller’s implied undertakings as to title, etc);

(b) section 8 of the Supply of Goods (Implied Terms) Act 1973 (the corresponding thing in relation to hire-purchase),

cannot be excluded or restricted by reference to any contract term.

(2) As against a person dealing as consumer, liability for breach of the obligations arising from—

(a) section 13, 14 or 15 of the 1979 Act (seller’s implied undertakings as to conformity of goods with description or sample, or as to their quality or fitness for a particular purpose);

(b) section 9, 10 or 11 of the 1973 Act (the corresponding things in relation to hire-purchase),

cannot be excluded or restricted by reference to any contract term.

(3) As against a person dealing otherwise than as consumer, the liability specified in subsection (2) above can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness.

(4) The liabilities referred to in this section are not only the business liabilities defined by section 1(3), but include those arising under any contract of sale of goods or hire-purchase agreement.”

According to this, certain terms cannot be included into a contract, even through the exclusion clause. The Sale of Goods Act 1979 also states that there is an “implied term that the goods supplied under the contract are of a satisfactory quality.”

Likely Outcome?

The likely outcome seems to be that Petra will have the upper hand with regard to the exclusion clause due to the unfair contract terms act.

The signs were covered by piles of clothes waiting to be dry cleaned. Furthermore the notices on the wall should have been given before the formation of the contract this is shown by the case of Olley V Marlborough Court Hotel (1949) (mentioned above)

However the Spit and Polish could argue that the conditions were printed on the form given to Petra when she handed over the clothes for cleaning, and signed without reading. However it was the manager who had told Petra that she had needed to complete that form as it “simply covered the shop if any of the decorations on her suit (which was heavily beaded) came off. In this way Petra’s case is similar to that of Curtis V Chemical Cleaning and Drying Company (1951) where Ms. Curtis took a dress to be cleaned and was asked to sign a similar contract to that which Petra has signed. When Ms. Curtis asked what the contract bound her to, the company’s employee said it was to disclaim liability for damages done to “beads and sequins” on the dress. This dress also came back stained. The exclusion clause was for all damage of any kind; however the court ruled that the company could not rely on it because it had been misrepresented in the shop.

Task 2

Re. Suit, Burn, Trip and black eye

Claim for negligence

In order to claim in an action of negligence, we must prove three things;

That there was a duty of care owed to her
That that duty of care was breached
That physical damage resulted

Duty of Care

After the case of Caparo v Dickman (1990) where the Caparo bought shares in a plc with a view to taking it over, and bought more after seeing Dickman’s auditors report. The shares then fell in value, and Caparo sued the auditors for there negligence in the preparation of the report. The House of Lords stated that the auditors didn’t owe a duty of care to investors thinking of buying shares. The damage suffered by Caparo was foreseeable but there was no “sufficient proximity” to give rise to a duty of care where the loss was economic. The courts view was that it would not be fair or reasonable to hold the defendant responsible.

It was found that to class as “duty of care” the negligence must be reasonably foreseeable, there must be a relationship of proximity between the parties involved and it must be “fair, just and reasonable” to impose liability.

Where duty of care and the breach of care are concerned the case of Ward v Tesco (1976) illustrates a case concerning the doctrine of res ispa loquitur. This is “the thing that speaks for itself.” Under the Occupiers Liability Act 1957, owners of premises have a duty to ensure that it is reasonably safe for visitors. Hence, when an accident occurs because the premises are not reasonably safe, the occupier of the premises may be liable to pay compensation for any injuries. In the case of Ward v Tesco (1976) a customer slipped on some spilled yogurt in a supermarket and was injured. There was evidence that these spillages occurred several times a day and although the supermarket had not themselves caused the hazard they had not, in this case taken reasonable care to ensure that the customer was reasonably safe.

In Petra’s case it can be argued that on one hand a raised carpet is an obvious obstacle that anybody could have tripped over and therefore was foreseeable. This is as well as the damage to the suit resulting in the burns on her hands, spit and polish will have been used to working with the concentrated dry cleaning fluid that was on the suit and had not taken reasonable care to make sure that all of it was removed before giving it to the customer. Overall Richard could foresee that if he did not ensure a good standard layout of the store as well as checks of customer clothes to make sure that there was no concentrated cleaning fluid etc. left on them then there would have been no resulting injury to Petra.

Breach of Duty

A definition of negligence is the “omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would do”; a person or business which engages in any activity that poses an unreasonable risk, or carelessness, towards others and their property that actually results in harm, breaches their duty of reasonable care.

An example of the courts deciding what a “reasonable person” would do is shown in the case of Morris v West Hartlepool Navigation (1956) where a seaman fell forty feet into an unguarded hold and was badly injured. The courts said that it was the duty of the employer in considering whether some precaution should be taken against a foreseeable risk to weigh on the one hand the magnitude of the risk, the likelihood of an accident happening, and the possible seriousness of the consequences if it does, and on the other hand the difficulty and expense and any other disadvantage of taking the precaution.

There is difficulties on the other hand when it come to proving breach of duty, the plaintiff usually will prove on a balance of probabilities that the defendants conduct fell short of the standard of care required. The fact that there has been any suffering or loss due to the defendant’s actions/act is not enough. In the example of Byrne v Boadle (1863) the plaintiff was passing the defendants premises when he was struck by a barrel of flour falling from above. Affirming the ruling of the trial judge, Pollock CB applied the res ipsa loquitur principle; as barrels do not normally fall form the sky without negligence, and this barrel was under the control of the defendants or their servants, negligence could be presumed and the Defendants had the burden of proving otherwise.

Again, a “reasonable person” who was a manager or worked for dry cleaners would realize that concentrated dry cleaning fluid would be harmful to them as well as the customers, as well as realizing that a raised carpet could result in someone tripping and hurting themselves, therefore it can be argued that there was a breach of duty within Spit and Polish

Resultant physical damage

Having proved that the defendant owed him a duty of care and that there was a breach of that duty, the claimant must then prove that it resulted in some loss or damage.

The “eggshell skull” ensures that if some personal injury was foreseeable, the defendant is liable for the full extent of the claimant’s even if the claimant was particularly susceptible. For example in the case of Robinson v Post Office the plaintiff slipped on a ladder at work because of oil on the step and suffered a minor injury. He went to hospital and was given an anti – tetanus injection, as a result of which he contracted encephalitis due to an allergy of which he was previously unaware. The Post Office, who were his employers were legally responsible for both the encephalitis as well as for the minor injury. If an accident is foreseen and the victim requires medical treatment then he is liable for the consequences of the treatment applied even though he could not reasonably foresee those consequences.

Petra may be able to offer proof of her physical damage through a doctor’s note and maybe through pictures of the resulting damages to her eye and to her hand.

Chances of Success?

Overall I believe that the chances of Petra’s success regarding the claim for negligence is strong for both the burns she experienced from the concentrated cleaning fluid and the trip she experienced on the way out. This is especially through the Occupiers Liability Act 1957 and also through both cases being reasonably foreseeable.

Possible Defense

As mentioned above, Richards’s defense will likely consist of the exclusion clause. However the Unfair Contract terms acts section 2 could go against this as it states that

“(1) 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.
(2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.
(3) Where a contract term or notice purports to exclude or restrict liability for negligence a person’s agreement to or awareness of it is not of itself to be taken as indicating his voluntary acceptance of any risk.”

Task 3

As mentioned above for Richard to use the exclusion clause the other party has to have notice therefore according to contract law, If Petra had visited the dry cleaners before and was already aware of those particular terms of the contract then she can have no claim against them with the argument that she had never been made aware of the terms as her regular dealings would prove that notice was implied. For example in the case of Olley V Marlborough Court Hotel 1949 mentioned above, if it could have been shown that Mrs. Olley had visited the hotel regularly, and that she was aware of the terms under which it did business, the clause may have been allowed to stand.

However the case of McCutcheon v Mac Brayne (1964) argues otherwise. Mr. McCutcheon asked his brother –in-law, Mr.McSporron to send his car to Islay on MacBrayne’s ferry. The ferry sank. Defending the claim for damages, McBrayne claimed that its conditions of business were displayed at the port, and were printed on its receipts. However, the court ruled that the contract was made by telephone, before McSporron had chance to see the terms. The receipts issued were not contractual documents. MacBrayne argued that it had done business with McSporron before and he ought to have known the terms. However, the court ruled that these dealings, although regular, were not of a sufficiently consistent nature to claim incorporation by prior business.

Really then, if Spit and Polish had enough evidence that Petra was not only a regular customer (for example in the case of Spurling v Bradshaw (1956) mentioned above), but also that the business had taken reasonable steps to alert the party to the terms of the contracts existence then Petra would fail to argue that there was any breach of contract.

Therefore it would be her case would be more likely to be successful if Petra had not been to Spit and Polish dry cleaners in the past.

Bibliography

Class Notes

Combe v Combe (1851) [Online]
[Available at] [19 Jan]

Contract [Online]
[Available at] Jan]

Eliason V Henshaw (1819), [Online]
[Available at] [19 Jan]

Exclusion Clause (2008) [Online]
[Available at] [9 Jan]

Felthouse v Bindley (1863) [Online]
[Available at] http://www.lawofcontract.co.uk/lapse-of-time.php [19 Jan]

HND/C Business Law
Making a Contract Workbook (Class Notes)
C.Turnburg

Hughes v Metropolitan Railway [Online]
Kevin Boone
[Available at] [19 Jan]

Negligence
Class Notes
C.Turnburg

Negligence [Online]
[Available at] http://en.wikipedia.org/wiki/Negligence [9 Jan]

Parker v SE Railway1877[Online]
Kevin Boone
[Available at] [11 Jan]

Thomas v Thomas (1842) [Online]
[Available at] [19 Jan]

Olley V Marlborough Court Hotel 1949[Online]
Kevin Boone
[Available at] [11 Jan]

Unfair Contract Terms Act of 1977 [Online] (2003)
[Available at] Jan]

Business Law The Law of Contract

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