The world’s economy is founded on people’s freedom to contract. Contracts are significant part of business existence seeing that they establish agreements between people and their customers, suppliers, employees, tenants or landlords as well as with companies. But obviously, many people are unaware of the essential elements necessary to make a contract enforceable. In addition, people are so used to seeing written and lengthy contracts that many of them believe that all enforceable contracts must be in writing. What many do not know is that the terms and conditions of any transaction including delivery of services and product sales can still be agreed upon by the parties even in the absence of a written contract. Like any other contracts, if the terms and conditions of an oral contract are established, a party who will eventually fail to fulfill his or her terms of the agreement will generally be held liable for breach of contract or breach of duty as imposed by law.
Essential Elements of Contract
Contracts have essential elements; first, every contract must essentially have an agreement. In fact, before there can be a valid contract, there must be first be a meeting of the minds or a consensus ad idem (Ollek). The determining factor if the parties have arrived at an agreement is resolved not by what the respective party believes the other to be agreeing to, but through an objective standard. Objective standard is an objective bystander’s conclusion, based on reasonable consideration of all significant facts to the issue that the parties had come to an agreement on the important terms of the contract with the intention to form a relationship that is legally binding (Ollek). If such is the case, then there is a contract between the parties, although both an offer and an acceptance must first be present in order to have consensus ad idem, which is indispensable to perfection of a valid contract.
Second, an offer is basically an indication or a statement that a person is prepared to enter into an agreement with another on specific terms. The offer must be clear and expressed in a manner capable of acceptance, so that the person receiving the offer will not be required to do anything further except to demonstrate acceptance and the person making the offer will be constrained by the terms if the offer is indeed accepted (Ollek). Moreover, the offer must not merely suggest an “invitation to treat,” but must necessarily express a general intention to enter into a contract and invite an offer consistent with the general intention.
Third, acceptance is essentially some indication that the offer is accepted by the person to whom the offer was made (Ollek). The acceptance must be absolute, unambiguous, and without any condition attached, such that the objective bystander can conclude that the offer has in fact been accepted. The acceptance must be made before the termination of the offer, and once the deadline of the offer has passed, the offer cannot be accepted unless the person making the offer has renewed the deadline. Likewise, if acceptance is considered, it must be made before the offer is withdrawn. Although as a rule an offer can be withdrawn before the acceptance, it cannot be withdrawn earlier if one of the terms of the offer states that the offer must remain open for acceptance for a particular period.
Lastly, the law requires that there must be given a sufficient consideration or something of value in order to complete a contract. The determination of the sufficiency of consideration is generally left to the parties in view of the fact that they are in a better position to judge whether or not the consideration constitutes a good deal (Ollek). However, the consideration cannot be something promised or given previously. To be sufficient, the consideration made in exchange for the offer must be some fresh benefit or a new promise. Likewise, where the consideration is considerably inadequate as to make the contract unconscionable or raise suspicions of fraud, the alleged contract is legally deemed invalid.
Role of the Law of Tort in Business Activities
Tort is an area of the law concerned with damages that take place to property or people as a result of a breach of a duty imposed by law and not by some contractual agreement between persons (Small Business Law Firms, 2009). Individual torts include passing off, negligence, nuisance, defamation and trespass. For instance, business activities that result in negligence due to selling of defective goods or improperly caring for a customer are considered a tort. Moreover, a business passing off the product of another company as its own is also considered a tort.
Understanding Tort of Negligence
Negligence is a type of wrongful act that brings about a civil court action, normally for damages, and for that reason is regarded as a tort. Business activity can cause negligence in several different ways, such as selling substandard services or defective goods. To prove negligence, a plaintiff must establish that the accused company had a legal responsibility of care, was in breach of its responsibility, and that there was damage due to the negligence (Small Business Law Firms, 2009). Damage can include financial loss, damage to property, nervous shock, injury or death.
Breach of Contract
Breach of contract basically implies failure of a person to perform without legal justification any term of a written or oral contract to which he or she is a party (US Legal). A breach may include not insuring the goods, substituting significantly different or inferior goods, failure to deliver all the goods, failure to make payment on time or in full, not finishing a job, etc. Moreover, breach of a contract may be continuing breaches, breaching at a particular point in time, or simply an entire single breach.
On account of a party’s breach, the non-breaching party is generally relieved from his or her obligations under the contract. Accordingly, courts will award damages not as a punishment to the breaching party, but to place the aggrieved party in the situation he or she would occupy if the contract had been accomplished (US Legal). In cases where monetary award is insufficient to pay the damages caused to the aggrieved party, the court may order specific performance to compel the breaching party to execute the original terms of the contract.
First, I will advise Marvin that from the time he paid the membership fee required by Dictum, a binding legal contract between him and Dictum accordingly existed, given that their respective acts constitute the essential requisites of a legally binding contract. Accordingly, the guarantees and warranties attached to the goods subsequently bought by Marvin from Dictum are now covered by the terms and conditions of the contract, which must all the same be in accordance with law to be valid.
Second, I will inform Marvin of the caveat emptor or buyer beware rule, which is a principle initially applied in early common law that seller of defective goods cannot be legally held responsible by the buyer of the said goods. Caveat emptor, therefore, suggest that it is the buyer’s duty to find out if what he or she is buying is what he or she desires. For Dictum, its membership agreement is an implied warning to Marvin that the company is not duty-bound to volunteer negative information with regard to the items it offers for sale (Business Dictionary, 2009). In view of that, unless Dictum gives express warranty, which is absent in the given case, it is assumed that the Marvin takes all risk of loss by reason of defects in the property or goods he bought.
Under modern law, the caveat emptor rule does not apply to the sale of goods. Instead, the rule is that the seller is always believed to grant an implied warranty that the goods are reasonably appropriate for the use planned by the buyer (Microsoft Encarta Online Encyclopedia, 2009). However, if the defects of the goods are conveyed by the seller to the buyer then the aforesaid goods may be sold without legal liability. In the given case, Dictum did not inform Marvin of the hidden defects or faults, as nothing suggests that the former was aware of the vinyl LPs’ particular defects or faults.
Third, I will inform Marvin that as a general rule, the seller is responsible to the buyer for any hidden defects or faults in the goods sold, although seller was unaware thereof. However, if the contrary has been stipulated by the parties and the seller was unaware of the hidden defects or faults then the rule is not applicable. This stipulation in the contract is known as exemption clauses, which basically attempt to restrict the responsibility of Dictum. Exemption clauses are divided into exclusion clauses that attempt to completely exclude liability for specified outcomes, which in the given case assumed by Dictum, and limitation clauses that attempt to set a limit on the total damages that the party has to pay if some terms of the contract are not accomplished (Businessbalss, 2004).
And fourth, Marvin should be informed that the courts generally have a tendency to strictly interpret the exemption clauses, generally favoring the party that did not write them. Although exclusion clauses in customer transactions are governed by laws that render most of them ineffective; nevertheless, the laws do not apply to transactions in the regular course of business (Businessbalss, 2004). In other words, Dictum can only be held liable for the defective goods if they are supplied to end user customers, which is not the case with regard to Marvin who is running a second-hand record store in Derby.
In view of the foregoing facts and legal considerations, I will ultimately advise Marvin that Dictum could not be legally held liable for the subsequent damage of the vinyl LPs. Moreover, although selling defective goods is considered tort, there was no showing that Dictum was negligent in its business activities and aware of the hidden faults or defects of the particular goods bought by Mervin. More importantly, there was a valid membership stipulation that states, “To keep prices down all products from this wholesaler are purchased at the buyers’ risk,” which Mervin acknowledged by paying the membership fee, paying low price for the goods, and by buying the second hand goods.
Apparently, the second case involves a contract of sale. By legal definition, “a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a monetary consideration, called the price” (Chest of books, 2009). A contract of sale may be conditional or absolute. Under a contract of sale where the ownership of the goods is immediately transferred to the buyer the contract is called a sale; but where the transfer of ownership in the goods is subject to some condition to be fulfilled thereafter or is to take place at a future time the contract is called an agreement to sell. An agreement to sell turns into a sale when the conditions are fulfilled or the time elapses subject to which the ownership in the goods is to be transferred.
In a contract of sale, acceptance made by telegram or letter does not bind the person making the offer except from the moment it came to his or her knowledge. Accordingly, there was a perfected contract of sale between Florence and Billy with regard to the sale of the home cinema system from the moment Florence received the acceptance letter on Thursday. In view of that, I would advise Florence that Billy’s assumption that the contract of sale is perfected if he does not receive any response is tenable, as there was already mutual agreement at the time the letter was received. Therefore, there was a perfected contract, and Florence should be informed that she is liable to Billy for breach of contract.
As already established, a contract is an agreement between two or more persons to carry out, or to refrain from carrying out, a particular undertaking in exchange for a consideration. In view of this, it is therefore expected that the consent of Florence and Lucie must be freely given and accepted. Likewise, the offer must be definite and the acceptance unconditional. In the given case, there was no meeting of minds between Florence and Lucie, given that there is no indication that the former was aware of the latter’s acceptance and, accordingly, as far as Florence is concern there was no unconditional acceptance on the part of Lucie. For this reason, I would advice Florence that she is not liable to Lucie for breach of contract when she eventually sold the goods to her father.
As a general rule, when the person making the offer has allowed the other person a specified period to accept, the offer may be withdrawn at whatever time before acceptance by communicating such withdrawal, except when the option is anchored upon a consideration, like something promised or paid. In contrast, an option contract is basically an acceptable condition of a contract that limits the authority of the person making the offer to withdraw the said offer. For that reason, the option contract protects the persons accepting the offer from the person making it.
Nevertheless, even if Tariq enclosed a cheque for £30 to keep the offer open until Wednesday of the following week, there was no acceptance on the part of Florence on Tariq’s offer, given the former’s obvious written notice to the latter that the system was already sold. Quite simply, Florence has not allowed Tariq or they did not have a meeting of mind with regard to a certain period of acceptance of the offer. Therefore, I would advise Florence that she is not liable to Tariq for breach of contract since there was no contract in the first place.
Under the law, a company is in breach of duty if “it carries out what it reasonably should be expected not to do or has failed to do what it reasonably should be expected to carry out” (Small Business Law Firms, 2009). Accordingly, a company is considered negligent if it is in breach of duty. In weighing up the reasonableness of actions the law takes into consideration several factors, including the possibility of damage being caused by a company’s inaction or action, how easy and cheap it is for a company to take safety measures against damage, the extent of damage brought about, and the need for the company to take appropriate action (Small Business Law Firms, 2009). Unless the facts speak for themselves, a plaintiff must all the same prove breach of duty, which is proving that the damage is evidently the consequence of a company’s negligence and obviously an incident within the exclusive control of the latter.
I. The Damaged Van
As a rule, anyone who causes damage to another through act or omission, there being negligence or fault is obliged to pay costs for the aforesaid damage. Accordingly, in accordance with the tort laws the managers and owners of an enterprise or establishment are equally responsible for damages caused by their employees on the time of their duties or in the service of the branches wherein the employees are working.
In view of this, there was clearly negligence on the part of the Obiter Carparks Ltd. resulting to a breach of contract when the van driven by Marvin was damaged by one of its employees. Obviously, Obiter failed to reasonably safeguard its customers’ cars. Despite of the notice at the entrance, which reads, “Cars parked entirely at owner’s risk,” Obiter is still liable for the damage since its policy is contrary to law and public policy, given that Obiter is the exclusive operator of the car park and it collects £6.50 for the said parking. Therefore, an enforceable contract is established, obliging Obiter with the legal duty of care. Accordingly, the damage caused by the employee is the result of company’s negligence in the selection of employee and is considered a breach of duty on the part of Obiter, making them equally liable for the damage.
II. The Broken Arm and Lost Handbag
With regard to Florence’s accident and lost handbag, it is apparent that Dictum is liable to the aforesaid fateful events. The sign displayed near the store’s entrance, which in summary states that the store is not responsible for any accidents that will happen inside its premises, does not hold water since it is contrary to law and public policy. The grave accident and lost handbag are basically caused by Dictum’s negligence, and despite how cheap and easy it is for Dictum to take precautions against the damages, it did not make any. Therefore, there is negligence resulting to tort on the part of Dictum, making them liable for the broken arm and lost handbag of Florence.
As already established in the preceding paragraphs, contracts are perfected by each party’s consent, and from that moment they are obligated not only to the performance of what has been specifically laid down in the contract but as well to all the consequences which, consistent with their nature, may be in keeping with law, custom and good faith.
I. Wild West Plumbers Ltd.
First, I would inform Marvin and Florence that there is a breach of contract if a person failed to complete the conditions or provisions contained in a contract wherein he or she is a party. Accordingly, any breach of contract leads to a cause of action, and even if there is no definite loss a claim for breach of contract is still appreciated by law.
Second, I would inform Marvin and Florence that obligations ensuing from contracts have the force of law and, therefore, must be accomplished in good faith. For that reason, if a person fails to perform any of his or her obligations, then the same shall be accomplished at his or her expense. Likewise, those who in the performance of their obligations are responsible of delay, negligence, or fraud, and those who in any manner breach the obligations’ actual intent, are liable for damages.
Third, I would advise them that there was an anticipatory breach of contract on the part of Wild West Plumbers, as it failed to meet one of the stipulations of the contract before the actual due date for its completion has arrived. Anticipatory breach usually takes place when one party announces an intention to substantially complete or not to complete a contractual obligation ahead of its due date (US Legal). In accordance with the rules set forth in breaches of contract, the non-breaching party is not obliged to perform their obligations and, accordingly, cannot be held responsible for not doing so.
Unfortunately for Marvin and Florence, they are now prevented or stopped from asserting the abovementioned legal defenses, given that they have already freely agreed with, although reluctantly, and tolerated the change of term requested by Wild West Plumbers. For this reason, the ensuing change of term became part of the contract. Therefore, I would advise Marvin and Florence to pay Wild West Plumbers the additional amount of £1,500 they promised.
II. Marvin’s Friend
With regard to friend’s case, Marvin and Florence cannot be held liable if the £200 promised by them is not paid. Even though there was a promised of payment, there was no perfected contract since Marvin’s friend did not accept or agree to any consideration when he or she helped Marvin get the shop ready in time. Although, parties are not required to use particular words to form a contract; nevertheless, there must be an offer by one party and an unconditional acceptance by the other party to whom the offer was made (Ollek). In view of that, there was no meeting of minds between the parties since there was no acceptance on the part of the friend and, as such, Marvin and Florence are not bound for its fulfillment as well as the subsequent consequences of their actions.
If the indispensable elements of an offer and acceptance with consideration are present the contract is deemed valid and binding. Accordingly, the contract becomes obligatory, regardless of the form it has been entered into, given that there is generally no requirement that the contract must be in writing. The problem is that if the unwritten agreements of the parties are to be depended on, it may be difficult and in several cases impossible to accurately resolve the terms of the contract if there indeed is an agreement to that effect. Apparently, if the court cannot with reasonable certainty decide on the terms that the parties have agreed to, the court cannot as well put the supposed contract into effect. It is for this reason that it is more appropriate to have a written contract even though it is not a guarantee that the writings of the contract are by design precise and clear.
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