Contract Law Assignment 3

* Explaining the law with respect to consumer protection * Analysing how consumers are protected in the event of a breach of contract for sale of goods * Describing remedies available for breach of contract * Analysing the remedies available to a business provider in the event of a breach of contract for the supply of goods or services Task 1.

Heep Ltd want to leave some lorries for two weeks at micawbers garage, the following morning heep received a note from micawaber, on the back were conditions exempting mikiwaber for ‘any kind of loss or damage in respect of vehicles in his care’ one of the lorries were left in a side street next to the garage while vehicles were being rearranged in the yard. It was stolen. Advise both parties regarding liability for the stolen lorry Consider common law and statutory provisions.

I would advise Heep to refer to Chapelton v Barry Urban District Council 1940 which deals with section 2(2), Negligence – “Exclusion of liability for negligence other than for death or personal injury must satisfy the requirement of reasonableness” The case follows: Chapleton hired two deck chairs, one of which collapsed injuring Chapleton, when hiring the deck chairs she has been given a ticket (headed receipt) and on the back was a clause excluding liability for any injuries.

It was then held that this clause was not in a reasonable place as all anyone would think is that they were getting a receipt for their money, meaning the clause isn’t valid because it hasn’t been expressed with the proper intentions. I would also advise Heep that the purpose of leaving his lorries at mikiwabers garage was for them to be safe and so the implied term of the lorries being kept safe was then implied. As the garage is purpose made for the storage of motor vehicles and the lorries were in mikiwabers care it is up to mikiwaber to ensure the safety of any property he is responsible for under section 2(2).

The mistake was made of leaving a lorry in a side street when Heep was under the impression that the lorries were all being kept safe in the yard. It would be unreasonable to keep the lorries in the side street as this wasn’t part of the agreement that the pair made. It would be unreasonable for Heep to have to pay for the lorries when he has made a contract and paid someone else to look after them. Spurling v Bradshaw [1956] The defendant used the services of a warehouse to store goods on a regular basis. Each time he delivered goods to the warehouse he was asked to sign an invoice which contained an exclusion clause.

This invoice came after the contract had been agreed. On one occasion he stored some barrels of orange juice and again signed the invoice. When he went to pick them up, however, some of the barrels were empty and one contained dirty water. Consequently he refused to pay for the storage. The claimant warehouse owners brought an action for the agreed price of storage relying on the exclusion clause to demonstrate that they were not liable for the damage to the goods. The defendant argued the clause had not been incorporated into the contract as he signed the document after the contract was made.

Held: The clause was incorporated through previous dealings. The defendant would have been aware of the term from the previous contracts and therefore it did form part of the contract. The claimant was entitled to payment and the defendant had no right to claim compensation for the damage to the orange juice. Hollier v Rambler Motors [1972] The claimant had used the services of the defendant garage on 3-4 occasions over a five year period. Each time he had been asked to sign a document excluding liability for any damage. On this occasion the contract was made over the phone and no reference to the exclusion clause was made.

The garage damaged the car during the repair work and sought to invoke the exclusion clause through previous dealings. Held: There was not a sufficient number of or regularity of transactions to amount to a previous course of dealings capable of incorporating the exclusion clause. It was not reasonable to expect the claimant to remember the clause from one transaction to the next. Consequently the garage was liable to pay for the damage. I would advise mikiwaber that he should pay for the missing lorry and that he didn’t provide a reasonable duty of care which the law states he should have.

The lorry he should have been looking after was left in a side street which would mean he doesn’t have control of the safety of the vehicle. The goods were not stored where they had agreed to be stored. The fact that he expressed his excluded liability on a note is irrelevant as it breaks section 2 (2) of the goods and services act. The note was already a day late also and this is after the contract has begun. For any clauses to work they need to be declared at the time the contract was made. I would refer him to the following case which shows the proper way to exclude liability.

Thompson section 2 (1) Mrs. T bought a railway ticket. it said 'for conditions see back', on the back of the ticket was a clause excluding the liability of the railway for an injuries whatsoever cause, Mrs. t couldn’t read, mrs t was injured when she fell out of the train at the platform (as there was no platform at her carriage doorway. she argued that she didnt know about it because she couldnt read. Held the clause was in a reasonable place on the back of the ticket and it had been communicated to most people. The fact she couldn’t read was irrelevant and they were not liable for her injuries.

If mikiwaber wanted to exclude his liability he should have told Heep at the beginning of the contract the terms. He should have also communicated these terms on the day of the agreement and on any official papers that they may have had. The law should state how many times the terms should be shown or if they need to be shown more than once. The terms for one contract may not be relevant for another even if they are for the same two parties. The term ‘reasonable place’ could be revised to be more specific, what may be a reasonable place for one party may not be for another and this would cause confusion.

Some people, not literally live in completely different worlds and what is considered reasonable in one place may be barbaric in another. If the terms of the agreement are the same for each occasion then that should be expressed that the terms are the same. Task 2 Gurlong Limited, who manufacture and sell braking systems are having problems getting suppliers to deliver components on time. This in turn means that Gurlong Limited often make late deliveries of braking systems to leading car manufacturers.

The contracts that Gurlong limited make with the large manufacturers all contain ‘compensation clauses’ dealing with the matter of late delivery. Gurlong have had on several occasions had to pay compensation under such clauses. Gurlong Limited are considering the introduction of a compensation clause in contracts they make with their suppliers. Advise about the validity of such clauses: Liquidated damages- Clause in the contract stating what compensation will be paid out in the event of a breach of contract. Un-liquidated damages – no clause in the contract stating amount of compensation to be paid out so the judge decides on the amount.

There is a case that relates to this problem, Gurlong Ltd should refer to the ‘Dunlop pneumatic Tyre co ltd v new garage motor co ltd 1915’ Dunlop sued its tyre retailer, New Garage, for breaching an agreement to not resell Dunlop tyres at a price lower than that listed in the contract. The clause between Dunlop and the garage stated “every time a tyre is sold below list price, a charge of ? 5 compensation is payable to the garage of ? 5” The agreement then said if that did happen, New Garage would pay ? 5 per tyre ‘by way of liquidated damages and not as a penalty’.

The judge held the ? 5 sum was liquidated damages and enforceable. The Court of Appeal held the clause was a penalty and Dunlop could only get nominal damages. Held This was a penalty clause rather than liquidated damages as it was not a genuine reflection of the loss suffered by Dunlop. This is a penalty- not a genuine reflection of loss and therefore cannot be enforced. Contract law– must be a genuine reflection of loss. Therefore not enforceable It was held that liquidated damages could only be charged if it was a ‘genuine reflection of loss’.

Gurlong ltd does have a genuine loss when the goods are supplied as they get charged by their customer’s compensation. It would be reasonable for Gurlong to charge compensation for the lateness of goods sent to them. Firstly it damages their reputation and this may cause big problems with Gurlongs customers who may choose to go somewhere else and cost Gurlong major business. The second reason is that Gurlong get charged for them being late which is the fault of late suppliers. It is then not Gurlongs fault so the charges should be passed on to the suppliers.

The law protects the customer financially in the short term but it doesn’t help with corporate image or financially long term. The law protects against genuine reflection of loss which is the loss of dunlops immediate money but the corporate image which requires the delivering of goods on time can be damaged. The law should allow for more negotiating between the businesses, if one business wants to charge penalties for late deliveries and the other business agrees then it should be allowed as it is a business agreement, the people that own and run these businesses are not stupid and should be allowed to make their own decisions.

As long as both parties know of penalty clauses then it should be carried out. The business that sold the tyres below the list price should have to pay penalties just as the rest of them should as they are selling specific goods. Task 3 Clayton mill now own all finished carpets that have their fibre in as the clause stated: ‘should the fibre be used for another product, the seller will retain beneficial ownership’. Also all the fibre left belongs to Clayton Mill.

Clayton mill are perfectly within their rights to take all carpets or they could give Carpet right the chance to sell the carpets and pay with monies which they could then use to pay other companies owed. They have priority over all other debts owed by carpet right due to the following case. Common law: Sale of goods act 1979 Section 17 Where there is a contract for the sale of specific or ascertained goods properly in those goods passes to the buyer when the parties to the contract intend it to pass Ascertained/specific – goods identified at the time contract is made.

Aluminium industries vaasen v romalpa aluminium ltd 1976 A Dutch company manufactured and sold aluminium to the defendants who were based in England, a clause in the contract stated that ownership of the goods would be transferred to the buyers only when they have paid all the money that was owed to the sellers and until that time the buyer could be required to store the goods in such a way that they were clearly still the property of the seller.

if the goods were mixed with other goods ownership of these goods should be transferred to the seller as security for payment and if the seller wasn’t paid the seller could trade the proceeds of sale and could claim that money against what they were owed. The English company went into liquidation still owing the Dutch company money and it was held that due to the existence of this clause the Dutch company has priority over all other creditors and were able to trace the proceeds of sale of the original file.

Clayton mills have previously been involved in a case that involves their fabric. Clayton mills v Geoffrey martin 1984 Seller sold goods to the buyer on credit and they knew that the fabric would be used to manufacture clothes; there was a romalpa clause in the contract allowing the seller to trace the proceeds of sale if unpaid. The buyer went bankrupt and the seller sued to trace the proceeds. Held An unpaid seller can keep ownership of their goods if the goods are still identifiable in their original state.

To trace the proceeds of sale for goods that have been subsequently manufactured the seller has to register a floating charge under the companies act If the seller gives the buyer goods that are of interest they need to register them and that will become priority over banks etc. who would usually be first in line to recover debt. Statutory law: personal property securities act For the Romalpa clause to take effect, carpet right have to have acknowledged in writing the meaning of the clause that has been explained to them by Clayton mill.

For the buyer to avoid the effect of the romalpa clause they have to have two conditions: one is that they must have had oral advice that is sufficient for a reasonable consumer to understand and have acknowledged this is writing. The second is that they have received a written copy of the agreement for supply, or the part of the agreement that contains the romalpa clause. The personal property securities act is an act that came into force in 2002, it requires all property of the seller to be registered before they will give the seller priority over other creditors with security interests.

The romalpa clause avoids the presumption set down in the sale of goods act 1908 that ownership of the goods passes to the buyer when they are delivered. The romalpa clause protects the business well by putting their debts before any others if that company has bought and processed goods from the company owed. The clause could be improved by being easier to apply for. It could be automatic if a company has processed goods from another and falls into debt it would be better for that company to automatically owe the other company.

It may not be useful for a company to retain ownership of all goods with their product in, it could therefore be improved by making the owing company sell all the goods and pay with the capital raised. Registering all property is a timely exercise and would involve the use of resources e. g time and money to carry out, all goods should be automatically registered. It would be more beneficial for the owing company to sell all the goods with product inside as they can then make a profit from it and pay back other companies or retain some for themselves. Task 4.

The consumer protection (distance selling) regulations 2000 describes that: You need to provide certain information to consumers before they enter into a contract with you including: * Your name and, if the consumer pays in advance, your address, * A description of the goods or services and the price, * Delivery costs and arrangements for delivery, * How long the offer or the price will remain valid, * The existence of a right to cancel and who will be responsible for returning the goods, and * If appropriate, the length of time that the contract will remain in force (for example, if services are being provided over a period of time).

Consumers also have a ‘cooling-off period’ of seven working days in which they can cancel the contract without penalty. The period commences on the date of receipt of the goods or, in the case of services, the day on which the consumer agreed to proceed with the contract. However, if at that point the information requirements (see above) have not been complied with, the period of seven working days commences when the information has been provided to the consumer or at the expiry of three months from delivery whichever is earlier.

If the consumer exercises the right to cancel it must make the goods available for collection (they are under no obligation to return them) and a full refund must be provided within 30 days of cancellation There are certain contracts which cannot be cancelled such as contracts for the sale of software, CD-ROMs and videos once unsealed by the consumer and newspapers, periodicals and magazines (although, interestingly, not for books which would seem to leave the cancellation rights open to abuse against booksellers).

Also the sale of perishables such as flowers is exempted as are items which cannot be returned such as electricity and items which are made to the customer’s specification. The certain contracts that can’t be cancelled such as software, CDs and videos protect the seller of abuses from consumers copying or misuse. The books are not covered and would allow a person to buy a book and within 30 days it can be taken back, in this time it could be read, passed around or copied not protecting the book seller. The cooling off period helps the consumer who may make an impulse buy.

Impulse buys can be more damaging in long distance sales as the amount could be much more and the product not what expected. To protect the consumer more the cooling off periods could be increased to 14 days and this would help them more, in the case of insurance the buyer could find a better policy or find that their policy is no longer needed therefore it would help to increase this amount. The consumer should have to return the goods if there are no problems with it and they just would just like a refund. Task 5 Slap is contracted to paint dash’s house for ?

1000, consider slaps right to payment if: 1. he paints all windows apart from one catch 2. he paints all undercoats but no top coats. 3. all his brushes are made from aardvark hair, he stops painting when the government bans the use of such brushes. 4. he stops paining when dash tells him he will not be paid even if he finishes the job 5. he goes blind before finishing the job. There are rules and exceptions for contracts between two parties when there is a problem, they are as follows: Breach: This occurs where one side of the contract fails to be fulfilled and breaches a term of the contract.

There are several forms of breach of contract : * Failure to perform a part of the contract is the most common breach when a seller fails to deliver goods by the correct time or when it is not up to the correct standard, quality or quantity. * Express repudiation which is when one party refused to perform his part of the contract. Frustration: This applies where there is no fault by either party. When the completion of the contract is prevented by the fault of one party, that party is in breach. Anticipatory breach.

One party before their part of the contract is finished makes it clear by expressing or implying that they will not carry on. The other side can either: * Ignore it and treat the contract as ongoing and then sue when actual breach occurs. * Accept the repudiation and make the decision known to the other party that you are sueing immediately. Performance The general rule is that the parties must perform exactly what it states in the contract. Cutler v Powell 1795: Mrs. C’s husband died during a voyage on board a ship he was working on, he had completed most of the voyage and his widow had received no payment for his work.

She sues for payment Held: the payment was for the whole voyage and therefore there was no entitlement for any payment although technically he was in breach of contract as he died, the judge stated that his widow should not be made to pay compensation. This case relates to: Slap painting all the house apart from one window catch. Using the general rule, painting the window catch was part of the contract so dash can refuse to pay the fee as the contract hasn’t wholly been completed. It also relates to if Slap goes blind during the job.

The contract hadn’t been completed so no money is entitled for Slap, he would need insurance if he wanted any money from the contract. Hoenig v Issacs 1952 A builder was to be paid upon completion of construction work, he had substantially completed the contract but there were a few jobs still remaining. the defendant refused to pay any money (issacs) as the house was not complete. Held: The court held that the claimant was entitled to his money that had been agreed under the contract but the amount that it would cost to complete the work should be deducted from it.

This case relates to slap not painting the window catch and only painting the undercoats. The job had partly been done so if the judge was using this case he would make Dash deduct the amount it would cost to finish the job out of the contracted sum. To avoid this the contractor should arrange to be paid per day, this means the contractor can leave a job when they see fit and gives them much more freedom. Frustration Only applies where there is no fault by either party. e. g. destruction of subject matter of contract Taylor v Caldwell 1863

This concerned the hire of a hall for a concert, before the concert was held the hall was burnt down. the court held the contract was frustrated and neither party was liable to the other. krell v Henry 1903 krell agreed to rent a room to Henry for the day of the coronation. it was understood by both that the purpose of letting the room was to view the coronation. the procession was cancelled due to the illness of the king. Held: The purpose of the contract was frustrated and krell was not entitled to sue for the rent of the room that day.

Herne steamboat company v Hutton 1903 Contract made that the claimants ship would be at the disposal of the defendants to take passengers from Herne bay on the 28th June to view the naval review and a day’s cruise around the fleet. The review was cancelled due to the cancellation of the coronation but the fleet remained at split head. Held: Although the review was cancelled the contract was not frustrated as the fleet were still there, therefore the defendants had to pay for the charter of the boats. Act of parliament 1943, explained consequences if a contract is frustrated.

The act doesn’t cover the movement of goods by sea, insurance contracts or certain situations. Remedies, if any money that is overpaid it can be claimed back. All his brushes are made of aardvark hair and he stops painting when the government bans the use of such brushes. The government ban of that type of paintbrush is out of either parties control, so the contract has been frustrated. The above cases show that when a contract is frustrated like it is, the payment is no longer required. Dash no longer has to pay Slap until he finishes the job, he can always use another type of paintbrush.

Averay v Bowden D's chartered C's ship at a Russian port and agreed to load it with cargo. before the ship was due to be loaded they made it clear that they were not going to load after all. This was clearly anticipatory breach and the choice the claimant had was 1. Wait until the actual breach (failure to load the cargo) 2. Sue immediately They chose to wait rather than sue immediately, before the ship reached the Russian port war broke out between Russia and Britain, You cannot enter into contracts with illegal aliens (people who have gone to war against each other).

This is now an illegal contract as it is a contract between enemies. The contract is therefore frustrated and terminates at this point. This law protects the parties because if one party thinks they should complete the agreement and the other doesn’t there is nothing that could be done and one party would be out of pocket. The law protects them by not allowing either party to complete the contract. Slap stops painting when Dash tells him he will not be paid even if he finishes the job. Slap now has the choice whether to sue immediately or sue after the actual breach (after he’s finished painting the house).

It would be silly of him to paint the whole house and then sue so Slap could sue straight away. Although the two parties are not at war against each other the contract is frustrated. Once dash tells slap he wont be paid for painting the house that is the moment it becomes frustrated. Slap would however have to prove this in court and would do well with a written statement from dash. The law protects the business really well by not making them finish their part of the contract while they know the other side isn’t keeping up their end of the contract.

The law helps protect the consumer by giving them a choice of suing before the actual break of contract or when it happens, this stops the customer from having to wait until the break occurs which could never even happen. Frustrating a contract protects the consumer from making warring counties from completing it. It wouldn’t be fair for a pair of companies from different warring countries to be tied to their contracts while the rest of the country is killing each other.

The government ban on aardvark hair doesn’t help the parties as it doesn’t draw a conclusion on either side, it would lose the painter their pay for the work already done and it isn’t his fault. The law doesn’t protect the business or consumer in this case as the law doesn’t provide any alternative to the aardvark hair, the painter would have to buy all new paintbrushes from a legal material from his own pocket, if he decided to carry on using the paintbrushes then it would be his decision to risk being caught.

The law is intended to protect aardvarks, nothing to do with actual work so it wouldn’t make a difference to the customer. The customer has paid for slap to paint his house, it is up to slap with which paintbrushes he uses. If this case went to court slap would be told he had to finish the job with the normal paintbrushes. Task 6 “James agreed to sell his personalised sports car to miles, a sports commentator and friend. Miles paid James ? 25,000 and James agreed to deliver the car at a later date”. Later on, James made another contract with Arthur, Arthur offered ?

30,000 for his sports car and James agreed. He then wrote to miles explaining that he could no longer deliver the car. This is a breach of contract as James has already accepted the original offer from Miles and therefore cannot complete the contract with Arthur. Miles has already paid James and the sale is basically complete so the car is actually in his possession if he has used a romalpa clause, if he hasn’t then the car remains the property of James until it is delivered. James has just made another contract with Arthur that he cannot fulfil, making it an illegal contract.

If he does sell the car to Arthur then Miles can sue James or report him to the police for theft as it is no longer his car to sell. If James completed the original contract with miles then there is no breach with him, yet he can still be sued by Arthur for a breach of their contract. James has also broken the contract with ICA that says he cannot perform any act for any reward without their written consent. As he has gone to Spain as a paid guest host of the club, this is an act for reward as he has been paid money and had his expenses paid for, therefore being a reward for his time, breaking their contract.

As he is in Spain he is also not available at all reasonable times to perform all engagements that the company may arrange. This is a possible breach and the company ICA have a choice whether to sue him while he is in Spain as he isn’t available to attend arrangements or wait until an actual breach occurs and they have an event for him to go to that he doesn’t attend. James breaches the contract when ICA require him to appear as a panel guest on a TV quiz show, which he refuses to go to. Miles- should give James an ultimatum whether to complete the deal with the two or go through the courts where Miles will win the case.

Miles will also get compensation as the contract has been broken, probably causing Miles stress. ICA- The relating case is ‘Warner Bro`s v Nelson 1937’ This involved Miss Bette Davis entering into a contract with “Warner Bros” and agreed to “not to undertake any film work or enter into any other occupation without Warner bros consent. It was held that this was unreasonable: The part about not working for any film company apart from warner bros is reasonable as she worked for them and it is a specific career. The second part is unreasonable as she might want to change her career path.

An injunction was granted to prevent her carrying out film work for another company as this part of the clause was reasonable. The clause however stated that no injunction would be granted to prevent her from working in other occupations as this would force her to work for Warner bros and was not reasonable. This would therefore show that James has broken the contract but ICA would be able to get an injunction as the contract was reasonable as it didn’t force James to do anything he doesn’t do already and it were for his benefit.

Another case were The Troggs v Managers. The Troggs managers sought an injunction to restrain the group from breaching their contract by engaging another manager. It was held because the group would not be able to get an order of specific performance to make their managers perform their services the managers could not get an injunction so there was no mutuality, it also recognized that stars fall out with their managers and should be able to change managers rather than be forced to only work for that particular manager provided adequate compensation was paid.

Therefore compensation was made should they want to change managers. James will have to pay compensation to ICA for their work and his irresponsibility. The law protects James as not performing any act for any reward without ICA’s consent is unreasonable as shown in the above cases. James may want to change his career path or it may be for the benefit of a wider audience. He should however keep to the contract if he undertakes any activity for reward that may directly affect ICA or for any publicity.

The law protects ICA by not allowing James to be doing anything for reward that may affect ICA without their consent, being his managers they have a right to allow or to not allow James to do any public act for reward but not simply any act. The law helps ICA by keeping james available for any work they have got, ICA have gone to the trouble of arranging work for James by investing their resources etc so james should invest his time in any of their work. The law protects miles as James had already sold his car to him; he just hadn’t collected it yet.

If the law was not in place James could go around selling it