Business law 5th edition (John Ellison) (Tom Harrison)
A case law example of offer is Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
The defendants, the proprietors of a medical preparation called "The Carbolic Smoke Ball," issued an advertisement in which they offered to pay 100 to any person who contracted the influenza after having used one of their smoke balls in a specified manner and for a specified period. The plaintiff on the faith of the advertisement bought one of the balls, and used it in the manner and for the period specified, but nevertheless contracted the influenza:-
The manufactures argued a number of defences, including the following.
- The offer was so vague that it could not form the basis of a contract as no time limit was specified.
- It was not an offer which could be accepted since it was offered to the whole world.
Decision: the court considered these two defences as follows.
- The smoke ball must protect the user during the period of use. The offer was not vague.
- An offer to the public can be accepted so as to form a contract.
The first offer was made by Dean to Ryan (Dean sent a formal purchase order which contained their standard terms) this was an offer but there was no acceptance however there was a counter offer.
A counter offer destroys the original offer and is actually a new offer. Below is the counter offer.
An example of counter offer is Butler Machine Tool v Ex-Cell-O Corporation (England) Ltd 1979
Facts:
B quoted to E a price for the supply of a machine tool and included in his quotation his terms and conditions. These allowed for price variation in the event of an increase in costs.
E replied with an order, somewhat different to the original quote in terms of delivery date and installation costs. It stated that the order was to be taken under their terms and conditions and providing a tear-off slip with which to acknowledge acceptance of these terms. B returned the slip.
Delivery of the product was delayed due to E’s reorganisation and costs, in that time, increased. B sought additional payment under the price variation clause in his original quote.
The Court of Appeal followed a traditional interpretation of events and held that E’s order was a counter-offer which revoked B’s original offer and which was accepted by B when he returned the tear-off slip. Thus, E was not liable to pay an increased price under the variation clause.
Point of Law:
A counter-offer will revoke an original offer, which cannot then be accepted. The original offeror can accept a counter-offer.
Ryan responded with an acknowledgement, containing its standard terms (enclosed).
In addition there was a battle of the forms where Ryan fired the last shot.
According to common law 1 page 10 it is stated that under the battle of the forms that the person or organisation that fires the last shot it is under their terms.
There are six requirements for contract to be valid they are
- An agreement which usually consists of an offer and an acceptance of that offer.
There initial offer was when Dean sent a purchase order, the was a counter offer when Ryan responded with its standard terms, there was a agreement when no further documents were exchanged
2. The agreement must have consideration which is something bargained for and given in exchange for a promise. I.e. money
Consideration is when Ryan entered into a contract to provide office furniture to Dean
Furthermore I assume that a consideration was made by both parties that Ryan will provide the furniture in exchange for money. In addition consideration is a performed act in return for a promise
3. The parties must have the capacity, or legal ability to contract.
Both Ryan and Dean have the capacity to contract.
It is stated in common law page 7 (the court presumes that this type of agreement is legally binding, and this presumption can only be rebutted by a clear intention not to be legally bound.) because Dean Argument is not clear therefore the contract is valid
And the agreement is a business agreement
4. The contract must be based on the genuine assent of each party, that is, both parties must be agreeable to the terms of the contract.
Because Dean and Ryan did not exchange further documents. The contract was agreed on Ryan’s terms as he was the last to fire the shot. In addition Dean was waiting for the furniture this shows that Dean agreed to the contract
5. The subject matter of the contract must be legal. An agreement to break the law would be illegal, for example. Nothing in the contact is illegal
6. Some contracts must be in proper form. Even though courts will enforce an oral contract, some categories of contracts must be in writing to be legal.
A perfect example of the contact in the scenario is when Ryan responded with an acknowledgement, containing its standard terms.
Conclusion
Is the contract on Ryan’s terms or not?
Unfortunately Dean cannot sue or claim compensation from Ryan because the contract is not on Dean’s terms, because a Battle of forms took place where Ryan fired the last shot hence the terms or contract is on Ryan terms.
In addition there was a counter offer; a counter offer destroys the original offer. The counter offer and battle of forms is below.
Battle of the forms
Firstly Dean sent a formal purchase order, which contained their standard terms. This is the first shot of battle of the forms.
Secondly Ryan responded with an acknowledgement, containing its standard terms. (Enclosed). No further documents were exchanged.
An example of Battle of the Forms is the case of
Butler Machine Tool v Ex-Cell-O Corporation (1979)
The plaintiffs offered to sell a machine to the defendants. The terms of the offer included a condition that all orders were accepted only on the sellers' terms which were to prevail over any terms and conditions in the buyers' order. The defendants replied ordering the machine but on different terms and conditions. At the foot of the order was a tear-off slip reading, "We accept your order on the Terms and Conditions stated thereon." The plaintiffs signed and returned it, writing, "your official order … is being entered in accordance with our revised quotation …”
The Court of Appeal had to decide on which set of terms the contract was made. Lord Denning M.R. stated:
In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out-of-date. This was observed by Lord Wilberforce in New Zealand Shipping Co Ltd v AM Satterthwaite. The better way is to look at all the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points, even though there may be differences between the forms and conditions printed on the back of them. As Lord Cairns L.C. said in Brogden v Metropolitan Railway Co (1877):
… There may be a consensus between the parties far short of a complete mode of expressing it, and that consensus may be discovered from letters or from other documents of an imperfect and incomplete description.
Applying this guide, it will be found that in most cases when there is a "battle of forms" there is a contract as soon as the last of the forms is sent and received without objection being taken to it. Therefore, judgment was entered for the buyers.
Ryan was the last one to fire the shot hence the terms are on Ryan’s terms.
The Counter Offer
Ryan responded with an acknowledgement, containing its standard terms (Enclosed). No further documents were exchanged.
Ryan’s counter offer destroyed the original offer from Dean hence the terms are on Ryan’s contract. The was an agreement, the evidence of this is that Dean was waiting for the goods
Ryan is attempting to rely on the following term under despatch and delivery (9) (a) that they do not accept no liability whatsoever for any loss or damage resulting in loss or damage from delay howsoever the same shall have been caused
The above is basically an exclusion clause in the contract an where Ryan is excluding its self from all liability in whatever and however caused
In addition Ryan is also relaying on the term Liability 15. The liability of the firm under this contact shall be limited to the replacement value of any goods by the firm to be defective. Defective goods will be replaced for free as originally ordered or credit will be given provided that the notice of any such defect shall have been given in accordance with these conditions. All conditions or warranties of every kind whether expressed or implied by law or otherwise all of which are hereby expressly excluded and no liability is accepted for damages or loss of any kind whether caused by negligence or otherwise and whether direct or consequential. The firm shall be under liability whatsoever in respect of any loss or damage to third parties caused directly or indirectly by the good or arising by reason of the firm against such loss or damage.
The above is basically an exclusion clause in the contract an where Ryan is excluding its self from all liability
The above term is stating that Ryan is not responsible for any loss or damage caused to third party. In addition there is a limitation clause in the above so if any does go wrong Ryan has reduced its liability
A case law example of Liability or Exclusion is
Chapelton v Barry Urban District Council 1940
Facts:
C hired a deck chair from the defendants and received a ticket when paying for the hire. The ticket had written upon it that the defendants would not be liable for any accident or damage arising from the use of the chairs. C’s chair collapsed and he was injured.
The Court of Appeal refused to allow the council to rely on its exclusion clause, deeming the ticket to be a mere receipt and not a contractual document.
Point of Law:
Exclusion clauses must be brought to the attention of the other party in a meaningful way if they are to be deemed effective.
HNC HND Business course book core unit 6 legal and regulatory framework published by BPP publishing
I would like to add that the following may not be valid
No liability is accepted for damages or loss of any kind whether caused by negligence
Because it is stated under unfair contract terms act 1977 Section 2 negligence
If a negligent act causes death or personal injury, liability cannot be excluded. If the negligent act causes other loss or damage, liability can be excluded if the clause passes the reasonableness test.
The reasonableness test.
S11 (1) a term must be fair and reasonable having regard to all the circumstances.
(Basick)
- Bargaining position of the parties
- Availability of other supplies
- Special order
- Inducement
- Condition
- Knowledge
- Insurance
If the term passes the reasonableness test then it will be valid
Ryan is also trying to rely on the following term force majeure
Force Majeure 14.the performance of all contracts is subject to any act of god, war, strike, lock-out, fire, flood, drought, and tempest or any other cause beyond the control of the firm and the firm shall not be held responsible for failure to deliver or comply with a contract due to any such contingency.
In simplified terms the company is trying to exclude itself from any liability
What is force majeure?
Force Majeure literally means "greater force". These clauses excuse a party from liability if some unforeseen event beyond the control of that party prevents it from performing its obligations under the contract. Typically, force majeure clauses cover natural disasters or other "Acts of God", war, or the failure of third parties--such as suppliers and subcontractors--to perform their obligations to the contracting party. It is important to remember that force majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party.
When negotiating force majeure clauses, Ryan should sure that the clause applies equally to all parties to the agreement--not just the licensor. Also, it is helpful if the clause sets forth some specific examples of acts that will excuse performance under the clause, such as wars, natural disasters, and other major events that are clearly outside a party's control. Inclusion of examples will help to make clear the parties' intent that such clauses are not intended to apply to excuse failures to perform for reasons within the control of the parties.
Scenario 2
The second issue concerns some computers that Ryan supplied to Tolcoat Engineering.
The contract was on Ryan’s Terms. Tolcoat have gone into liquidation and Ryan has not been paid for the computers (value £8,400). The liquidator is claiming the goods belong to Tolcoat since they are operating in the offices of Tolcoat. They are planning to sell the computers as part of the liquidation. Ryan is seeking to rely on clause12, claiming they are entitled to repossess the goods, because they are the owners.
Analysis of scenario 2
Foreword
Below I will state all the main headings or vital points in scenario 2.
- Ryan supplied some computers to Tolcoat Engineering
Tolcoat engineering have accepted the goods and have shown acceptance by conduct hence they have agreed to Ryan’s terms
According to common law 1 page 5 the following 4 are examples of how acceptance can be made through communication
- Acceptance must be unconditional- otherwise a counter offer
- Acceptance must be communicated
- Acceptance by conduct
- Conduct can include accepting the goods.
- The contract was on Ryan’s Terms
Basically Tolcoat cannot argue with Ryan terms because he has accepted the goods by accepting the goods he has agreed to Ryan’s terms, so what Ryan’s terms says Tolcoat must abide as he has agreed by accepting the goods
- Tolcoat have gone into liquidation
Basically Tolcoat have gone into bankruptcy so they have lost all of what is theirs
- Ryan has not been paid for the computers (value £8,400).
Ryan still owns the goods because they have not been paid for in full
- liquidator is claiming the goods belong to Tolcoat since they are operating in the offices of Tolcoat
Liquidator is claiming everything in Tolcoat premises belong to Tolcoat
- They are planning to sell the computers as part of the liquidation
Trying to sell something which they do not own
- Ryan is seeking to rely on clause12, claiming they are entitled to repossess the goods, because they are the owners.
A term in Ryan’s contract says under 12b all good shall remain in the ownership of Ryan until they are paid in full, meaning every penny has to paid to Ryan then Tolcoat are the owners.
Any clause attempting to exclude section 12 is treated as absolutely void by virtue of the unfair contract term act, 1977.
Conclusion
Ryan is attempting to rely on clause 12 retention of title. Clause 12 retention of title clause was incorporated in the contract at the time of supply.
It is stated in clause 12 b that all goods shall however remain the sole property of the firm both legally and beneficially until such time as the firm shall have been paid in full the price thereof inclusive of VAT. In addition it is stated that the customer specifically acknowledges and undertakes that he shall possess any goods of which he shall be in possession solely as a bailee for until such time as the firm shall have been paid in full the price thereof inclusive of VAT.
The above states that until Tolcoat have not been paid Ryan every penny including VAT; the property will remain under Ryan’s ownership.
Furthermore it is stated in Ryan’s Terms until such time as the customer becomes the owner of the goods in accordance of these of conditions, he will store them on his premises from his own goods and those of any other person and in a manner which makes them readily identifiable as the goods of the firm.
The above basically say that Tolcoat should make Ryan’s goods identifiable as Ryan’s goods, so if anything goes wrong like Bankruptcy then Ryan’s goods are identifiable to the liquidator that the goods that are not owned By Tolcoat engineering.
A “retention of title” clause is a clause that allows the supplier to retain ownership over the goods supplied until such time as certain conditions are met, thus providing the supplier with a form of security against the buyer's default or insolvency. Retention of title clause is sometimes known as a Romalpa clause or as a reservation of title clause.
A case law example of Retention of title is
Aluminium industrie vaassen Bv Romalpa Ltd 1976
R purchased aluminium foil on terms that the stock foil (and any other proceeds of sale) should be the property of the Dutch supplier until the company had paid to the supplier all that it owed (every penny).Romalpa got into financial difficulties and a receiver was appointed. The receiver found that the company still held aluminium foil and proceeds of selling other stocks of foil, and had not paid its dept s to the supplier. The receiver applied to the court to determine whether or not the foil and the cash were assets of the company under his control as receiver.
Held: the conditions of sale were valid. The relevant assets, although in the possession of the company, did not belong to it. The receiver could not deal with these assets since his authority under the floating charge was restricted to the assets of the company.
HNC HND Business course book core unit 6 legal and regulatory framework published by BPP publishing
Under the Sale of Goods Act 1979, where there is a contract for the sale of specific goods, the supplier can retain his right to ownership of those goods even though they have been delivered to the purchaser as long as all parties to the contract agree to this provision. For example, if it is stated in the contract, the supplier may retain the title to the goods until full payment is received. When valid, the supplier’s claim to any unused goods will be binding against any trustee or liquidator subsequently appointed.
The liquidator is claiming the goods belong to Tolcoat since they are operating in the offices of Tolcoat. According to Ryan’s terms the good should be identifiable as Ryan’s to any outsider. This is stated under clause 12d until such time as the customer becomes the owner of the goods in accordance of these of conditions, he will store them on his premises from his own goods and those of any other person and in a manner which makes them readily identifiable as the goods of the firm.
So the liquidator cannot claim the goods are Tolcoats as they should be readily identifiable as Ryan’s.
They are planning to sell the computers as part of the liquidation.
Can the liquidator sell Ryan’s goods?
The liquidator may not be able to sell Ryan’s good because the contract is Ryan’s terms init it is stated that until.
According to the sale of goods act 1979 Section 12. The person selling the goods must be the owner or must have permission from or by the owner to sell goods. The liquidator has no permission form Ryan in all condition to sell the goods so he cannot sell the goods.
Any clause attempting to exclude section 12 is treated as absolutely void by virtue of the unfair contract term act, 1977.
The above gives evidence that the liquidator claim will be absolutely void by virtue of the unfair contract term act, 1977.
The liquidator will not be able to sell the goods in addition Ryan will be able claim the goods back under the title retention clause.
Bibliography
Books
Business law fifth edition John Ellison Tom Harrison HLP Harrison Law Publishing
HNC HND Business course book core unit 6 legal and regulatory framework published by BPP publishing
Bielefield, Arlene and Lawrence Cheeseman. Interpreting and Negotiating Licensing Agreements: A Guidebook for the Library, Research, and Teaching Professions. New York: Neal-Schuman Publishers, 1999.
Epstein, Michael A. and Frank L. Politano. Drafting License Agreements. 3rd ed., (looseleaf), NY: Aspen Law & Business, 1997.
Halvey, John K., Computer Law and Related Transactions. Charlottesville, VA: Michie Company. 1994.
Harris, Lesley Ellen, Content: A Practical Guide for Librarians. Chicago: American Library Association, 2002.
Megantz, Robert C., How to License Technology. New York: John Wiley & Sons, 1996.
Milgram, Roger M. Milgram on Licensing. 2 vols. (looseleaf current updates), New York: Matthew Bender, 1990.
Ubell, Robert. Draft negotiating networked information contracts and licenses. New York: Robert Ubell Associates, 1994. 75 p.