The only exception to the communication rule is the ‘’postal rule’ where acceptance is valid from the moment the letter of acceptance is posted. If the letter never reaches the offeror, the contract is still formed as long as it is correctly stamped, addressed and posted. However, the offeror can state that acceptance is only complete when it has been received, to avoid this rule.
Richard made the acceptance after Maria had offered to buy the car. Richard will have initially accepted the offer orally and Maria completed the relevant paperwork and handed over a cheque which formed the contract.
Consideration
This is the ‘promise of money in return for some goods or a service.’3
The value of consideration does not have to be equal but adequate. Consideration is not valid if it is in the past. There are two forms of consideration:
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Executed - Where one party promises to do something in return for the act of another.
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Executory - Where the parties exchange promises to perform acts in the future.
Consideration in our case was the exchange of money for the car. This is executed consideration. There was a promise of a car in exchange for £2,500.
Intention to Create Legal Relations (ITCLR)
This is the intent of the parties to be bound by the terms of the contract and enter into 'legal relations'.
When entering into commercial agreements ITCLR is presumed. However, intention can be removed by statement in the contract as shown in Rose & Frank Co v Crompton (TR) & Bros. Ltd 1925. It was held that the agreement was not legally binding due to an ‘honourable pledge clause’.
In our case, intention is presumed, as it is a business transaction.
Conclusion
A contract does exist between Maria and Richard. The advert placed in the newspaper was the invitation to treat, inviting offers from anyone who was interested in buying the car.
The offer was made by Maria when she offered £2,500 in return for the car.
The acceptance was made when Richard, the Salesman, accepted Maria's offer and this was then put in writing when Maria signed the paperwork for the car.
The consideration was the money in exchange for the car.
The ITCLR is present as it was a business transaction between Motor Traders, an establised business, and Maria, the consumer.
Task 2
Misrepresentation
‘A misrepresentation is a false statement of fact made by one party to influence the other to enter into a contract. A statement of law, opinion, intention or sales talk is not regarded as misrepresentation’.4
Bissett v Wilkinson 1927 – Bissett was stating his opinion when he told Wilkinson his land would hold 2000 sheep. There was no misrepresentation.
Horsfall v Thomas 1862 – Thomas claimed he had been misled into purchasing a gun from Horsfall by a metal plug, which was not in the breach. Held it was not an actionable misrepresentation. Not knowing of the existence of the metal plug could not have influenced Thomas to buy the gun.
To be an actionable misrepresentation it must have induced the person to enter the contract.
There are 3 types of misrepresentation:
- Fraudulent misrepresentation
- Negligent misrepresentation
- Innocent misrepresentation
Fraudulent Misrepresentation - The person making the statement knows it is false. This is classed as fraud and the person making the statement would be liable.
Remedy: Under common law the other party can rescind the contract and sue for damages for the tort of deceit. ‘Rescission’ restores the parties to their original state as though the contract was never made.
Derry v Peek 1889 – Derry bought shares in Peek’s company after seeing a statement in their prospectus. The statement was untrue. Held that the defendants believed the statement to be true and therefore this was not a fraudulent misrepresentation, as it was not made knowingly or recklessly.
Negligent Misrepresentation - The person making the false statement has no grounds for believing it to be true and there is a lack of reasonable care taken to determine the accuracy of the statement.
Remedy: Rescind the contract in equity. Damages may be awarded for negligence if the claimant can show that the misrepresentation was in breach of a duty of care, which arose out of a special relationship as in Esso Petroleum Co Ltd v Marsdon 1976.
The claimant can sue for damages under the Misrepresentation Act 1967 unless the defendant can prove that he had reasonable grounds for his statement.
Innocent Misrepresentation - The person making the statement has reasonable grounds to believe it to be true when made.
Remedy: Rescission of the contract in equity. The court, in discretion, may award damages.
The Sales of Goods Act 1979
Section 14(2) states: ‘Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.’5
Satisfactory quality is judged upon whether it meets the standards of a reasonable person upon:
- Whether the goods are fit for all its purposes
- Appearance and finish
- Free from minor defects
- Safety
- Durability
It is evident that the car is not of satisfactory quality with regards to its fit for purpose, minor defects and durability.
The Unfair Contract Terms Act 1977
The Unfair Contract Terms Act ‘invalidates any exclusion clause inserted in a consumer contract to cover breaches of the implied conditions of description, satisfactory quality, fitness for purpose, and sale by sample in the Sale of Goods Act 1979’6
The ‘sold as seen’ sticker, which Richard referred to when refusing to take back the car, does not exclude Maria’s rights as stated in The Sale of Goods Act 1979.
Conclusion
The type of misrepresentation would depend on whether Richard had known about the cars true condition.
If Richard was knowledgeable of the defects and did not state this in the contract, he is liable for fraudulent misrepresentation. Maria would give back the car and retrieve her £2,500. She could sue for damages.
If Richard was unaware of the defects when stating it was in ‘good nik’ but had no knowledge of his statement being true, he would be liable for negligent misrepresentation. Maria would be able to rescind the contract and claim for loss under the Misrepresentation Act 1967.
If Richard had grounds for believing his statement to be true this would be an innocent misrepresentation. Maria could rescind the contract.
The exclusion clause (‘sold as seen’ sticker) is rendered void by The Unfair Contract Terms Act 1977. Therefore, Maria still has her consumer rights and would be able to sue for misrepresentation.
Task 3
Exemption Clauses
Motor Traders have displayed a notice in their car park stating that it excludes them of any liability for injury, loss or damage to persons or property in any circumstances. This is known as an ‘exemption clause’.
Exemption clauses are ‘express terms which seek to exclude or limit the liability that might belong to one party in the event of a breach of contract’.7
Validity of Exemption Clauses
It must be shown that the clause was incorporated into the contract and agreed by both parties. The exclusion clause must be sufficiently communicated.
In the case of Chapelton v Barry UDC 1940 it was held that the exclusion clause on the back of a receipt was not adequately communicated.
In Thompson v LMS Railway 1930 it was held that an exclusion clause on the back of a railway ticket was adequately communicated, as it was reasonable for the ticket to contain contract terms.
If a contract is signed which includes an exclusion clause restricting a persons rights, it is held to have been agreed by the person signing it.
L’Estrange v Graucob 1934 – L’Estrange bought a vending machine and signed a sales agreement without reading the small print. The machine did not work. It was held that she still had to pay for the machine as she had signed her rights away under the Sale of Goods Act 1893. (As the law stands at present, the Sales of Goods Act 1979 would not be excluded as in this case).
Unsigned Documents
Exclusion clauses may be contained in notices or tickets. Each party must be aware of an exclusion clause at the time of entering into the agreement if it is to be binding.’8
Thornton v Shoe Lane Parking Ltd 1971 – Thornton parked his car in a car park and obtained a ticket from a machine which was subject to the conditions displayed on the premises. A notice was displayed which disclaimed liability for injury. Thornton was badly injured. It was held that the conditions on the ticket were not included in the contractual terms. Lord Denning said ‘the customer is bound by the contract as long as they are sufficiently brought to its notice before-hand’.9
Where a term is onerous it must be brought to the attention of the other party before the contract is formed, otherwise it does not become part of the contract.
Interfoto Picture Library Ltd Stiletto Visual Programmes Ltd 1988 – A clause stating a holding fee for delay of delivery was included on the back of a delivery note in small print. It was held that the onerous term had not been sufficiently brought to the defendant’s attention and the charge for delayed delivery was reduced.
The contra preferentum rule states ‘the clause must be specific as to the circumstances in which the exemption is claimed otherwise the clause will fail’.10
If there is any ambiguity in the contract, this will work against the party relying on the exclusion clause.
Hollier v Rambler Motors 1972 – The garage disclaimed liability for damage caused by fire to customers’ cars on the premises. Held that the term was not incorporated into the contract. The term was ambiguous and should have stated exemption from fire damage due to negligence and not in the narrower sense which it was written.
The Unfair Contract Terms Act 1977
This Act protects consumers by invalidating certain exclusion clauses. It does this by considering whether the clauses are reasonable.
Section 2(1) states: ‘There can be no restriction or exclusion of liability for death or personal injury resulting from negligence’.11
Conclusion
Maria can sue for her injuries which she sustained in Motor Traders car park.
The exclusion clause is void under the Unfair Contract Terms Act 1977 as it was due to the company’s negligence that Maria sustained her injuries. This Act automatically voids the exclusion clause as Motor Traders cannot restrict their liability for negligence.
Reference Page
- Keenan D & Riches S, Business Law Third Edition, 1993, Pitman Publishing, London, pg 183
- Keenan D & Riches S, Business Law Third Edition, 1993, Pitman Publishing, London, pg 189
-
Needham et al, Business for Higher Awards 2nd Edition, Heinemann, Oxford, pg 503
- Edexcel HNC & HND Business Course Book, Legal & Regulatory Framework, BPP Publishing, London, pg 80
-
Quote taken from website: , page 4 of 16
- Chris Turner, Contract Law & Tort, 2000, Hodder & Stoughton, Oxon, pg 89
- Keenan D & Riches S, Business Law Third Edition, 1993, Pitman Publishing, London, pg 232
- Edexcel HNC & HND Business Course Book, Legal & Regulatory Framework, BPP Publishing, London, pg 108
- Chris Turner, Contract Law & Tort, 2000, Hodder & Stoughton, Oxon, pg 81
- Chris Turner, Contract Law & Tort, 2000, Hodder & Stoughton, Oxon, pg 84
- Chris Turner, Contract Law & Tort, 2000, Hodder & Stoughton, Oxon, pg 89
Bibliography
Edexcel HNC & HND Business Course Book, Legal & Regulatory Framework, BPP Publishing, London
Needham et al, Business for Higher Awards 2nd Edition, Heinemann, Oxford
Keenan D & Riches S, Business Law Third Edition, 1993, Pitman Publishing
Chris Turner, Contract Law & Tort, 2000, Hodder & Stoughton, Oxon
Ellison et al, Business Law Third Edition, 1994, Business Education Publishers Limited, Durham
Charles Boundy, A Concise Business Guide to Contract Law, 1998, Gower, Hampshire
