a) (i) Bilateral and Unilateral contracts
The bilateral contracts mean that each party takes on an obligation action usually by promising the other something. Most contracts are bilateral. For examples, David promises to sell the house and John to buy it. Case Carlil v Carbolic Smoke Ball Co (1893)
BY contrast, a unilateral contract arises where only one party assumes an obligation under the contract. See Case Great Northern Railway Co v Witham (1873) The common example for unilateral contract is that between estate agents and people trying to sell their houses. That is the seller promise to pay a specific percentage of the house price to the estate agents if the house is sold, but the estate agents if is not required to promise to sell the house. (Edexcel/BTEC 2004)
(ii) Express and implied contract
Express contracts is specially mentioned and agreed by both parties at the time of contract expressed by verbally, either orally or in writing.
Also, express breach occurs, where one of the parties declares, before the due date for performance, that they have no intention of carrying out their contractual obligations.
Hochster v De La Tour (1853) For example, in April, De La tour employed Hochster to act as a travel courier on his European tour, stating on 1 June. On 11 may De La Tour wrote to Hochster stating he would no longer be needed his services. Hochster started proceedings on 22 May. The defendant claimed there would be no cause of action until 1 June. (ACCA F4, 2009)
Implied contracts has not be mentioned by either party will nonetheless be included in the contract often the contract doesn’t make commercial sense without that term. Implied breach occurs where one of the parties does something which makes subsequent performance of their contractual undertaking impossible. Omnium D’Enterprises v Sutherland (1919) for example, the defendant had agreed to hire a ship to the claimant but before the hire period was to commence, he actually sold the ship to someone else. (ACCA F4, 2009)
(iii) Void and Voidable contracts
Void contract is not an actual contract at all. The parties are not bound by the void contract and if they transfer property under it they can recover their goods from a third party unless it is also illegal contract.
For example, Anne sells furniture to Bill, who then sells them to Cathy. But Bills fails to pay Anne for the furniture and disappear without any notice. In this situation, Anne can explain that he was genuinely mistaken to identity of Bill and recover the furniture, which were subject to the original contract from Cathy. Furthermore, the law takes a view that is there is no original contract between Anne and Bill and no effect. Therefore, Cathy was an innocent third party acting in good faith, has to return the furniture to Anne and either the loss or find and sue Bill.
Voidable contract mean, a contract which one party avoid, that is terminating at his option. Property transferred before avoidance is usually irrecoverable from a third party. Also, mistake, misrepresentation, duress or undue influence may render a contract voidable.
For example Anne sells computer to Bill on 5th July. On 9th Bill sells that to Cathy. On 11th, it is discovered that Bill had made a misrepresentation in the original contract between Anne and Bill and Anne seeks to recover the goods. In this case, given these dates, computer has been sold on to Cathy before Anne tries to avoid the original contract, and at the time bill sells computer. Therefore, Anne cannot recover the computer from Bill. On the other hand, Bill had not sold the computer to Cathy until July 13, which is after Anne seeks to avoid the contract with Bill, that original contract has already been avoided, and Bill would not be able to pass computer to pass good title on to Cathy.
(1a) East Midlands Airways’ Airbus
A contract is an agreement that is legally binding upon the parties to do it. (ACCA F4, 2009) The law of contract is mainly about the enforcement of promises. The elements that are needed to form a valid contract are follows:
· Agreement – offer and acceptance
· Intention to create legal relations
· Capacity and legality
In this case study, East midlands Airways (EMA) advertised for airbus 321 based on the principles of an invitation to treat not an offer. Although rather an evidence that the EMA may wish to either accept or reject any offer. An invitation to treat is an indication that someone is prepared to the other party to make an offer. (Edexcel/BTEC 2004) It is not an offer and cannot be accepted to form of a valid contract. The types of an invitation to treat are advertisement, exhibition of goods for sale such as shop window and shelves displays, auction sales and tenders. Therefore, this airbus advertisement is an attempt to induce offers that classified as an invitation to treat. See case Patridge v Crittenden (1968)
According to the case study, Phil (the offeror) the chief executive of Zulu Aviation Ltd made the offer with offeree EMA’s managing director Joseph. In relation to the contract law, an offer is a definite and unequivocal statement of willingness to be bound on specified terms without further negotiations. An offer can be in any form such as oral, writing or conducts and an offer can be made to a particular person, to a class of persons or even to the world. Carlill v carbolic smoke ball co (1893)
In relation to the case study, there has been acceptance of the offer. Because, the offeree Joseph accepts the offeror Phill. In contract law, offer and acceptance making the agreement which is main elements of binding contract. Acceptance is the unqualified and unconditional agreement to all the terms of the offer by the form of oral, written or conduct. Inaction does not imply acceptance. Also, acceptance is not effective until communicated to the offeror. The offeror may waive the need for communication of acceptance by making an offer to the entire world. Carlill v Carbolic smoke ball co (1893)
Furthermore, every simple contract must be supported by some form of consideration from each other. In this case study, Phill’s consideration is the promise to pay £100,000 and Joseph’s consideration is the promise to not to sell the airbus to another buyer for next five days from 15th October 2010. The legal meaning of consideration is and act or promise of it on the part of one party to a contract as the price of the promise made to him by the other party to the contract. Dunlop Pneumatic Tyre Co v Selfridge & Co Ltd (1915) (ACCA F4, 2009)
There are two types of consideration in contract law, which are executory consideration is given where there is an exchange of promise to do something in the future. Executed consideration means that the consideration is in the form of an act carried out at the time the contract is made. (ACCA F4, 2009)
In addition, the basic rules of consideration are as follows:
1. Consideration must be sufficient but need not to be adequate. That means, there must be some monetary value to the consideration and must be capable in law of amounting to consideration.
2. Past consideration is insufficient. That is consideration is past if the consideration is an act which has been wholly performed before the other party gives his promise.
3. Performance of an existing duty is not sufficient consideration except the existing contractual duty is exceeded. (ACCA F4, 2009)
According this case study, the wording of the agreement clearly negated intention to create legal relations between Phil and Joseph. In all business agreement is presumed that there is an intention to be legally bound, unless it can be shown otherwise. This is a strong presumption that can be only be rebutted by clear evidence to the contrary. Jones v Vernon’s Pools Ltd (1938) This mean the parties intend that the agreement will be binding with recourse to court action for its enforceability. There was a business agreement between Phil and Joseph.
Phil and Joseph both are above age 18, which is the legal age for valid contract to be entered. Also, there was no evidence influence of drugs or alcohol and both are both individuals are mentally fit to enter to valid contract. Therefore, there were no vitiating factors that would affect the validity of the contract between Joseph and Phil for the purchase of the Airbus.
From the above stages, the agreement legally binding between Joseph and Phil meet all the elements that are needed to form a valid contract for the sale of the Airbus.
(1b) Mobile Phone contract
Contractual terms are statements that form part of the contract by word of mouth or in writing as long as they are sufficiently clear for them to be enforceable.
A statement, written or oral, made during the negotiations leading to a contract, may be a term of the contract or merely a representation inducing the contract. (ACCA F4, 2009)
A representation is something that is said by the offeror in order to induce the offeree to enter into the contract. It may or may not become a term of that contract. In the case of failure by any party, if the representation becomes a term of the contract, the innocent party has remedies for breach of the term as well as for misrepresentation. However, the representation does not become a term of the contract, the innocent party will have remedies only for misrepresentation which are based on equitable remedies. (ACCA F4, 2009)
The types of contractual terms are as follows:
1. Conditions :
Condition is an important term going to the root of the contract. The breach of the condition can result in damages or discharge or both. Also, breach of condition entitiles the innocent party the right either to terminate the contract or refuse to perform their part of it, or to go through the agreement and sue for damages. Poussard v Spiers & Pond (1876)
2. Warranties :
A warranty is a subsidiary obligation which is not vital to the overall agreement, and in relation to which failure to perform does not totally destroy the whole purpose of the contract. The injured party has completed their own part of the agreement, and can only sue for damages. Bettini v Gye (1876)
3. Innominate terms
An innominate or determinate term is neither a condition nor a warranty. The remedy depends on the effects of the breach. If trivial, it is a warranty and the remedy is damages only. If serious is a condition and remedy is either damages, discharged or both. (The Hansa Nord (1976)
The terms of contract in this case study is innominate, which mean the remedy depends on the effects of the breach contracts for the purchase of 300 mobile telephones immediately suitable for use in the U.K.
In the case (i) the use of the telephones supplied was illegal in the UK and the failure to modify to make legal had been a breach of a condition and the defendant supplier company was at liberty to treat the contract as discharge and it was treat the contract has ended. Poussard v Spiers & Pond (1876)
In the case (ii) the telephones supplied required tuning and taking two minutes for each. It was held that there was only breach of warranty. The supplier (defendant) could not treat the contract has ended. They were entitled to damage only. Bettini v Gye (1876)
Overall, in case (I) the supplier couldn’t modify to use was breach of a condition and the mobile company can terminate the contract and sue for damage. In case (ii) supplier can modify to use was breach of warranty and they can claim only for delay or damage.
Case study 2 Brakes Ltd
Exemption clause is a party to a contract may include a term in a contract to exclude or limit his/her liability in the event of a breach of contract or in any specific circumstances. Also, exception clause is generally included in a contract to protect the party drafting the contract from being sued by the other party for damages, negligence or other losses. Exemption clauses can be split into two parts which are exclusion clause and limitation clause. (ACCA F4, 2009)
Exclusion clauses excludes liability completely for specific outcomes and limitation clauses limits a maximum on the amount of damages the party may have to pay if there is a failure of some part of the contract.
In the case study, when the Cathy took her car to service at Brakes Ltd she had always been required to sign a contractual document before handling her car. The contract has an exclusion clause that clearly stated that ‘Brakes Ltd accepts no responsibility for any consequential loss or injury sustained as a result of any work carried out by the company, whether as a result of negligence or otherwise’.
In the common rules or judicial process, for the exclusion clause to be valid, it has to be incorporated in the contract by signature, notice and previous dealings or custom. In the statuary rules, it has to correspond with the unfair contract Terms (UCT) Act 1997 and Unfair Terms in Consumer Contract Regulations (UTCCR) 1999. (ACCA F4, 2009)
In this case study, the Brakes Ltd gave the receipt which is accepted by Cathy without reading printed the Brakes Ltd.’s usual business terms, including the exclusion clause. Therefore, the exclusion clause was incorporated in the contract by 3 previous dealings between Cathy and Brakes Ltd and receipt contains similar clause ‘Brakes Ltd no responsibility for any loss or injury’. J.Spurling Ltd v Bradshaw (1996).
However the Brakes Ltd exclusion clause doesn’t satisfy the statutory rules for control of exclusion clause contain in unfair contract terms (UCTA) 1977 and UTCCR 1999 act, which is void or invalid clause that exclude liability for negligence causing loss or injury. Holliers v Rambler Motors 1972
After considering all the aspect of the contract of the law between Brakes Ltd and Cathy, the garage accepted that their employee was negligent but denies any liability, relying on the exclusion clause. So, the case is favour of Brakes Ltd, Cathy is not entitled to the any compensation.
Part B Low of Tort
3a. tortuous liability vs. Contractual liability
There are some fundamental differences between a tort and contractual liability, which are follows
· The contractual liability is undertaken voluntarily and that it is assumed in return for the benefits promised by the other contracting party. But liability in tort is not undertaken voluntarily, rather it is imposed by the courts on the basis that certain types of behaviour amounts to civil wrong.
· In a breach of contract, it must be shown that the defendant was subject to the obligations of a contract and did not perform his obligations. In tort no previous transactions or relationship need exist.
· Liability in contract is generally strict. That is a party will have to carry out its obligations or face the legal consequences, while liability in tort is based on fault. A person will only incur tort liability if his conduct does not match up to an objective reasonable standard in most of circumstances. (legalmatch.com)
However, contract liability and tort liability share many similarities. At the most basic level, Tortuous liability and contractual liability both give rise to a civil and usually deal with a duty that has been breached. Also, damages awards can be obtained in both contract and tort violation. These are monetary payments made by the liable party in order to make up for any losses that result from their breach. (legalmatch.com)
Tort is a breach of a legal duty or an infringement of a legal right which gives rise to a claim for damages. Tort of negligence is the breach of a legal duty to take reasonable care, which results into injury or damage to another person. In order for an action in tort of negligence to succeed, the claimant must prove the following elements of a tort of negligence: (ACCA F4, 2009)
3b. Case study 3: Kings Restaurant
Carlos invited Janet out for dinner in an award winning and very expensive English restaurant called King’s. Carlos believed that the King’s restraint follow quality control such as hygienic, health and safety. At the restaurant, after the delicious main course they ordered the cake and coffee for Janet and chocolate ice-cream for Carlos. When Janet was eating a mouthful of cake, she spluttered and coughed and spat out a decomposed insect. The sight of the decomposed insect caused her to suffer nervous shock and she collapsed. This is a duty of care which King’s was unable to provide. This is similar to the case Donoghue v Stevenson (1932). In order to avoid any further embarrassment, Carlos paid restaurant bill and he took Janet home as she continued to feel ill. The contamination of the cake caused Janet to suffer gastroenteritis for several days. It is prove that defendant King’s restaurant failed to take care that is duty of care was breached. Case Blyth v Birmingham waterworks company (1856). As consequence of the breached both Carlos and Janet were mortified at the turn of events and their potential romance did not recover and the foreseeable type of damage was caused by breach. Therefore they decided to sue the king’s restaurant for its negligence. This shows the last element in tort of negligence that is resultant loss.
The standard of care test for establishing breach of duty care was set out in Blyth v Birmingham Waterworks Co (1856) which stated that the breach of duty occurs if the defendant fails to do something which reasonable man, guided upon those considerations which ordinary regulate the conduct of the human affairs, would do, or does something which a product and reasonable man would do. (ACCA F4, 2009)
For a claim of tort of negligence to be successful, the must prove that he has suffered loss or damage as a direct consequence of the breach. In the case Barnet v Chelsea and Kensington Hospital Management committee (1969) even if the doctor had examined Mr Barnet at the time there was nothing the doctor could have done to save him. Therefore, the hospital was not liable as the doctor’s failure to examine Mr Barnet did not cause his death. (ACCA F4, 2009)
Furthermore, the claimant must able to show the type of loss that is reasonably foreseeable suffered as a result of the defendant’s breach as defined in The Wagon mound (1961). If the type of damage is reasonably foreseeable the defendant is liable.
The breach of contract however was caused by the cake not being fit for purpose, which as mentioned earlier in the Sales of Good Act 1979, the implied terms were breached.
In the other hand Janet is a third party in this case she has no contractual agreement with the restaurant, similar to the case Donoghue v Stevenson (1932). There was a duty on the part of the manufacture of their products. The manufacture owes a duty to the consumer to take reasonable care to prevent injury. Therefore Janet can sue King’s restaurant for