LEVEL 4 DIPLOMA IN PARALEGAL PRACTICE UNIT 2 CONTRACT LAW 1. Olive advertised in the "For Sale" column of the Classic Car Journal - "1949 Triumph Roadster. Good condition. 1 year MOT, £13,000". The advertisement gave her address and telephone number. Paul saw the advertisement on Friday night and immediately wrote to Olive at her home address, agreeing to pay the £13,000 requested. He posted the letter on Saturday morning. Quentin also saw the advertisement on Friday evening and telephoned. There was no reply, but he left a message on the answering machine agreeing to buy the car for the asking price. Olive, who had gone away for the weekend, returned on Monday morning. She picked up Paul's letter and read it whilst listening to the messages on her answering machine, including the message from Quentin. On Tuesday, she decided that she did not want to sell the car at all. a) Advise Paul and Quentin of any contractual obligations between themselves and Olive. b) Assuming a contract to sell the car exists, how does Olive avoid having to sell the car? A) In contract law, a contract is a "legally enforceable agreement", and this particular scenario is based on a different aspect of offer and acceptance. Offer and acceptance are the foundation of a contract. To form a contract, one party must make the offer, which the other party accepts, and then, in most cases, goods and services will be exchanged between the two parties. Sometimes offers can be rejected or supported by a counteroffer. In this case, Olive intends to sell the car for £13,000, making a unilateral offer extended to anyone. She advertises "For sale", and according to Patridge V Crittenden, advertisement is not an offer, but an invitation to treat, so the advertiser is not required to sell. Therefore, an invitation to treat cannot be considered an offer but merely an invitation to negotiate between parties. On the other side, Paul's agreement to pay the 13,000 pounds should be interpreted as an offer, not acceptance. Now is essential how those offers have been communicated to Olive. Paul posted the letter to communicate the offer unconditionally to buy for the asking price. Although Olive did not express any acceptance as silence cannot constitute a valid acceptance. There is no contract between Paul and Olive until the offer has been accepted. Olive intention to make the contract to the public at large, like Carlill v Carbolic, can be seen by the Court as having no intention to create a legal relationship. There is no binding contract for any contractual relationship between Quentin and Olive until the offeror can hear that the offer has been accepted; Domb and Another V Isoz (1980). In this specific case, the Court will look for an agreement between parties with the same intention to form a contract (meeting of mind). b) Assuming a contract to sell the car exists, how does Olive avoid having to sell the car? Assuming that a contract exists, Olive cannot avoid selling the car as all the requirement of the contract has been fulfilled and a legally bounded contract is formed. Therefore, in this particular scenario, she will be in a breach of contract. 2. John agrees to meet Joan and Elizabeth for lunch at the Ritz Hotel in London. Joan and Elizabeth turn up but John fails to put in an appearance. Can they hold John responsible for any losses that they may occur as a result of their wasted journey? To determine John responsibility, we need to consider the different nature of the agreement between parties and whether there is a clear intention to create a legal obligation. In this specific case, Contracts of this kind are usually domestic or social, between relatives or friends. In domestic or social agreement, the court presumption that both parties did not intend to create any legal obligation Balfour v Balfour (1919). There are cases where this presumption may be rebutted, between Husband and Wife in Merrit v Merrit (1970) or Simpkin v Pays (1955). For example, it may sound expensive to have lunch at the Ritz Hotel. However, Joan and Elizabeth cannot hold John responsible for any losses that may have occurred since this 'meeting' would be considered a social agreement, thus not legally binding. 3. How does the contractual capacity of a minor differ from that of an adult? In contract law, there are seven elements for a contract to be enforced, and one of these elements is the capacity to enter into a contract. In addition, the law establishes who is not legally capable of contracting, giving special protection to minors and those with mental disabilities. According to the Family Reform Act of 1969, individuals under 18 are referred to as 'minors'. Therefore, minors can enter into contracts under the law. However, such agreements are voidable until the minor reaches 18 (and for a limited period after that). Concerning minors, only two types of contracts are valid. Firstly, contracts for necessaries, where minors are obliged to pay for any necessities supplied to them. In the Sale Of Goods Act, 1979, we find a statutory definition of "goods" in s.3, which says "goods suitable to the condition in life of the minor and his actual requirements at the time of the sale and delivery". As a result, if sufficient quantities of the goods in question have been provided, any excess will not be considered necessary. Thus, the contract cannot be enforced, as demonstrated in Nash v. Inman (1908). It is also possible for minors to enter into legal agreements for their education, such as apprenticeship contracts. These types of contracts are enforceable against minors; The Court determines whether the contract is actually 'for the benefit of the minor.' In other words, if a minor pay a reasonable price for items required in the circumstances, they are legally required to fulfil the contract. Doyle v White City Stadium (1935) is an example of the enforcement of such a contract. No money was paid, but the contract was enforceable since the training provided made the contract beneficial. The case of Clements v London & NW Rail Co (1894) is another instance where a contract was found to be enforceable, despite the removal of certain benefits following an employment contract. However, the benefit of the contract was determined to be beneficial, and the contract was upheld. In other cases, whether an agreement is considered not to be advantageous to a minor, the Court may not enforce it. De Francesco v Barnum is an example of how the Court considered the contract bound because it contained conditions considered not beneficial to the minor. A void contract under the Infant Relief Act, 1874 contracts for the repayment of money lent or to be lent and contracts for goods supplied or supplied but not necessaries. If a minor makes a payment under a contract, usually, it cannot be recovered unless the contract was not beneficial to the minor. Thus, a minor cannot be reimbursed for the money already paid if he enjoys goods or services and then attempts to terminate the contract and recover the money. The minor's Contracts Act 1987 was introduced to protect minors contracting with adults. In conclusion, the difference between minors and adults entering a contract is the capacity to understand all contract terms. Children are vulnerable people and can easily be influenced by an adult. 4. "Though mistakes mean disappointment, even bitter disappointment, this is not a ground for relief from contractual burdens." Illustrate and explain this statement in relation to the effect of a mistake on contract liability. The mistake means disappointment because sometimes we do not pay attention before entering into a contract. Generally, we have different types of mistakes; the mistake will only affect the validity of the contract if it is so fundamental that it nullifies consent. If the mistake is at the heart of the contract, the contract will be void. Mistakes can occur from both parties, and this can happen in various ways. Both parties may prepare and sign written terms that don't correspond with what they agreed on orally, or they may both be mistaken about a relevant matter or sales. 5. Over dinner at Peter's house, John admires a pair of candlesticks. Peter, in conversation, says that they have been in the family for a hundred years and that they are Georgian. A few days later, John offers to buy the candlesticks for £7,000, and Peter accepts. Six months later, John discovers that they are Victorian and worth only £1,000. Advise John of any remedies against Peter. This is a common scenario of Innocent/Negligent Misrepresentation. Misrepresentation is one party's false statement during a negotiation, encouraging the other party to enter into a contract. All misrepresentations are presumed negligent. For example, Peter believed that candlesticks were authentic Georgian (around1830 ) because they were in the family for a hundred years. When Peter makes that statement, there is no clear intention to create any legal relationship with John. There is a valid offer from John, followed by an acceptance by Peter; consideration is £7,000, then the contract is formed. On the other side, John believed Peter's word could be considered a Unilateral Mistake. A misleading mistake is that John didn't ask for an estimation of the goods that could certainly give the candlesticks an actual value. Due to the nature of the contract, the Court would set a misrepresentation on one side and a Mistake on the other side. The remedies for misrepresentation would be recission of the agreement and/or a claim for damages under Misrepresentation Act 1967 S.2. With the rescission of the contract, John will get the money back from Peter, and Peter will get his candlestick back. However, a Lapse of time can also defeat a claim for recission (Six months passed since John discovered that the candlesticks are Victorian) Leaf v Internation Galleries. Peter misled John and falsely represented the goods, and it was on that basis John entered into the contract to purchase them for £7,000 when the full description of the candlesticks was not accurately provided to John. Accordingly, John should claim back his damages and loss of £6,000. 6. Mogul Petrol Co. Plc has a chain of petrol stations in the South East of England. The Company has recently installed automatic car washes at ten of their sites. Placed prominently at the 'startmachine' of each car wash is a Notice as follows: Disclaimer Notice Please note that we do not accept responsibility for any injury, loss or damage of whatsoever nature and howsoever caused arising directly or indirectly out of the use of this machine or these premises Last week one of the petrol station Managers submitted the following Report to Head Office: "A customer came into the shop and purchased a token for the car wash. He then drove into the car wash area and pulled up by the start machine. He apparently inserted his token into the machine, but nothing happened. He then got out of his car to investigate. For some unknown reason the rollers of the car wash machine had come to a halt halfway through a wash cycle and were positioned at the back of the car wash. I understand that the customer banged the start machine because nothing was happening, when the car wash suddenly started. One of the top brush rollers that was positioned above the car was loose and fell onto the car, bounced off and hit the customer. The damage to the car is estimated at around £1500 and the customer suffered a fractured skull and broken arm, extensive bruising and shock. An examination of the car wash after the accident revealed that two of the retaining bolts on the top roller had worked loose, thus allowing the roller to fall. The customer has threatened legal action for damages, but I have told his Solicitors that the Company is under no liability in view of our Disclaimer Notice displayed quite clearly at the car wash machine". a) How much (if any) of the petrol station's liability does this notice exclude? Understanding whether the disclaimer note excludes the petrol station Mogu Petrol co liability. However, the Disclaimer notice does warn the customer that if any damages, injury or loss is caused, the petrol station will not be reliable. Therefore the customer is well aware of the consequences that may take place before using the machine. Although buying the token, the customer made an informed decision to use the car wash machine; he knew that there might be some risks involved and still went ahead to use the service. Further examination after the accident revealed that two of the retaining bolts on the top roller had worked loose, pointing out that Mogu Petrol didn't carry out any maintenance to prevent any accident. Consequences of the accident the customer reported injured fractured skull and broken harm and damage car estimated around £1,500. The Mogul Gas Company would be responsible for a malfunctioned system since it was negligent not to check the tightness of bolts on the cleaner before installation. The manager/ company had a duty to check the machine was working correctly and performed correctly. The fact that it was not working before the customer used the machine caused damages/injuries to the customer. Negligence refers to the failure to use reasonable care or skill in regulating or implementing a contract's express or implied terms. In this scenario, the Disclaimer notice or exclusion clauses cannot protect the Mogu petrol co and/or the management against negligence resulting in death or personal injury S.2 of the Unfair Contract Terms Act 1997 Thompson v Lohan (1987). Anyway, in standard contract form, the exclusion clause is subject to the requirement of reasonableness. b) When will the Court imply terms into a contract? The contract terms will need to be investigated because even though the customer knew the risks involved, there was an implied term that the machine was working normally (and there were no issues). Therefore, the manager's duty was to check that the machine was operating in normal condition before any customer came to use it. Suppose the disclaimer is contained in a contract with a consumer, the Court will interpret the disclaimer contra proferentem, or against the interest of the business see the case Shoe Lane Parking Ltd. c) The petrol station's insurance contract contains the following term: "It is a condition of this contract of insurance that the petrol station display an exclusion notice at its facilities." What is the legal effect of word "condition" in this clause? The word "Condition" in the insurance contract is a contract term between the Insurance company and the Petrol station. Therefore, failure to display the exclusion notice means the insurance won't pay any damage or injury. 7 a) "The courts are not easily convinced that a given change of circumstances is of sufficient gravity to frustrate a contract." Discuss! According to the doctrine of frustration, a contract may be discharged if events happen after its formation that renders its performance illegal or impossible and as a result of a specific similar circumstance. Therefore, parties will have to find whether their contract has been frustrated if the force majeure clause doesn't apply or if the clause does not apply to the specific 'event'. However, it can be challenging to establish frustration of a contract under English law, and the circumstances in which the doctrine can be used are limited. Contracts may be terminated if found. Increasing the difficulty or cost of performance is not enough; the frustrating event must be so fundamental that it strikes at the core of the contract and is completely beyond what the parties intended when entering the agreement. The rule of frustration can be found in Parradine v Jane (1647) and later modified in Taylor v Caldwell (1863); in both cases, the Court refused to apply the doctrine of frustration as the event destroys the central purpose of the contract. As the effect of the frustration, the contract ends at the actual point at which it is frustrated. Therefore the parties are not compelled from any contractual obligation from that point forwards. The 1943 Law Reform (Frustrated Contracts) Act allows the recovery of prepaid sums under most commercial contracts after the contract has been frustrated. Money paid to one party before the frustrating event may be recovered, and the parties are relieved from any obligation to pay money due before the frustrating event but not yet paid. Under S1(3), the Court may require a party who has obtained a 'valued non-money benefit' under the contract before frustration to pay a 'just' sum for it, regardless of whether any money had been paid or was owed. (b) Fred runs a plumbing business. He wins a contract with George for the installation of water systems in a housing estate being built by George. Fred agrees to complete the work by December 2016. George promised Fred that he would be able to start the work on the 1st January 2016. As George fell behind schedule, Fred was only able to start work on the 1st March. He protested about the delay, but attempted to complete the work in accordance with his contract. However, in December he abandoned the contract (when he had completed three quarters of the work) in order to start work on another project, which he had contracted to start in December in anticipation of the work for George being completed. George has given Fred nothing in payment for the work completed. Advise Fred. Fred didn't have any obligation not to take any other work in December during the frustration period. George promised to start the job in January 2016, but he could begin only in March. Fred contracted the work in December in anticipation of the work for George to be completed. Therefore there's not any breach of contract. Despite this considerable delay, Fred attempted to complete the work following the contract deadline. In this particular situation, based on a Quantum meruit George should pay in order to the work done by Fred. A quantum meruit is "the amount he deserves" or "the amount he has earned". It refers to a claim for payment for services or goods provided to the defendant in most cases. Fred can claim for the work completed ¾ but not for the remaining ¼. 8. Give an example in which a contract might be vulnerable to an allegation that it was procured by duress, and another example of a contract procured by undue influence. The word "duress" or "undue influence" generally refers to an individual or party being forced into signing a contract. Such a contract can be considered void because there's no "Consensum ad idem". In other terms, there's no meeting of minds between parties. An example of duress can be any threat or coercion, and the party have no choice but to sign the contract. For example, in Barton v Armstrong (1975), the Court held that the contract was violable because the threats of personal violence were the factor in the claimant decision to purchase the shares. Undue influence is an equitable remedy at the discretion of the Court. It covers the situation where one party has gained an unfair advantage by applying improper pressure. An example can be between husband and wife; thus, the claimant has to prove duress or undue influence. However, the Court can set aside the case in some circumstances because it automatically presumes that the strongest part applies undue influence on the other parties.
