Contract Business Law: Lowes Contract Law Specialists Advice

Contract Business Law: Lowes Contract Law Specialists Advice

Business Contracts in English Law

 

 

CASE SUMMARY

David a sales representative of Woods Office Supplies wants a prestigious car with quality leather seats and electric windows”.  The car priced at “£14,999 includes metallic paint finish. David visits Martons Cars for a test drive and readily agrees and arranges for a delivery date for the end of the month.

However Martons Cars did not meet the delivery time scale. Woods office supplies required immediate delivery so that their sales representatives could use the car to go out on the road to sell current products. Woods office supplies wishes to cancel the contract and purchase the car from another firm. Martons Cars refused to refund citing a disclaimer “All goods sold are subject to their being stock (availability) when the order reaches our manufacturing site”. Car also delivered with seats not leather and the metallic paint finish was charged separately

What is a contract in law?

A contract is defined as an agreement between two parties (imposing) rights and obligations which may be enforceable by law as long as two conditions are fulfilled: an offer has been made and there has been acceptance of it (McKendrick 2012; Poole 2010).

Elements of a valid contract in English law

Therefore the first two elements that make a contract valid start with an

1) an offer

2) and acceptance of an offer

An offer simply refers to a “expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed” (McKendrick 2012 p.7).

An offer is sometimes confused with an invitation to treat which is different because an offer is capable of acceptance while the latter only invites others to make or negotiate the offer e.g. counter offer. An acceptance on the other hand is an expression of total and unreserved agreement to all the terms of an offer by words or conduct. Both an offer and acceptance can be terminated or contested. In the case of an offer, the conditions for termination include acceptance, refusal, counter offer, death, revocation (withdrawal before acceptance), and failure of a precondition. Acceptance is usually contested on the grounds of communication of acceptance, therefore, offerees must show in some positive way an intention to accept and communicate this to offeror. The last part that makes a contract valid apart from offer and acceptance is

3) consideration which refers to all parties to a contract getting something of value (McKendrick 2012;Poole 2010)

There are a few other elements that can alter a contract apart from those discussed and one such element is legal intent which means genuine intention. Sometimes a contract may have an offer, acceptance and even consideration but may not be legally enforceable (See Balfour V Balfour 1919).

The last essential element of contracts validity is

4) capacity to form contracts. Under normal circumstances, courts assert that most adults have contractual capacity but there are exceptions which include corporations, drunk or mentally impaired people and minors.as well as diplomats. Otherwise, if all these terms are present, then a contract is valid and the only problems will arise from terms of contract itself (McKendrick 2012).

Terms of a contract and their impact

The terms of a contract are specifically the contents which govern the transaction and it is these terms that become important when there is a breach. Some terms of a contract are more important than others. For example, in the case of Woods Office Supplies V Martons Cars, the most important term of the contract was that Woods Office Supplies they required immediate delivery so that their sales representatives could use the car to go out on the road to sell current products. The courts may think this a more serious term than the car arriving with seats that were not leather which may be seen as a less serious condition. But it is imperative to differentiate between terms and conditions of a contract because this may help settle this case when one party sues for breach of contract.

Woods Office Supplies V Martons Cars

In order to determine if there has been a breach of contract by Martons Cars, it is important to examine what the terms were and whether the terms are conditions or warranties that have been breached since the remedies available will differ based on its conditions or warramty breach (McKendrick 2012). The first point to note is that a breach of a warranty only entitles the innocent party to damages while breach of condition gives the aggrieved party choice to either

a) repudiate/end contract or

b) continue with contract but also claim damages (Ibid)

What is clear is that Woods Office Supplies had the major term which specified immediate delivery as a condition so that their sales representatives could use the car to go out on the road to sell current products. We therefore assume that if Woods Office Supplies do not get that car immediately within the set period, their sales people will not be able to go out on the road and sell the products therefore depriving them of the whole benefit that was meant to be obtained from the contract. Under the Sale of Goods Act 1994, breach of condition entitles the innocent party to repudiate the contract for breach of condition by the seller (Johnson 1996; McKendrick 2012)

It therefore means that Woods Office Supplies is entitled to cancel the contract given that a major breach of the terms has occurred which affected the “course of dealing” meaning that the late delivery went to the root of the matter, rendering the whole purchase pointless. Further, the Sale of Goods Act 1979 also gives consumers the legal right to a refund, repair or replacement if an item they bought does not match the description, is not of satisfactory quality, and is not fit for purpose (Johnson 1999; BBC 2012; McKendrick 2012)

The car that was delivered did not have leather seats as contracted breaking the clause of “does not match description” of the SGA 1979 Act andalso the car price of “£14,999 was supposed to include metallic paint finish represents a breach of warranty of terms that stated it was part of the package, not to be invoiced separately. Therefore, Woods Office Supplies are entitled not to pay for an addition (metallic pain finish) that came as warranty of sale.

Exclusion and Exemption Clauses in English contracts

Martons Cars have refused to refund the money as they argue that the contract contained a disclaimer “All goods sold are subject to their being stock (availability) when the order reaches our manufacturing site”. Martons Cars maintain that the clause is part of the contract and that the car will be despatched shortly when it is in Martons Cars stock.

The Unfair Contract Terms Act 1977 S2 sets out that no contract term can exclude or limit liability in any way most notably in ways that may negligently cause death or injury. But the provisions in the act apply to consumer transactions with major restrictions on contract clauses that had the objective of:

a) Limiting compensation for breach of contract

b) Limiting remedies available

c) Excluding liability for breach of an express or an implied term

d) Attempting to restrict the scope of a contractual obligation where the term excludes or restricts any relevant liability if some condition is not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable as set out in Section 3 (Johnson 1996). It specifically sets out that a “contract term cannot exclude or restrict liability for non-performance or for performance which is substantially different from what was agreed, unless it is reasonable to do so” (McKendrick 2012 p.123)

Section 3 is especially applicable in defense of Woods Office Supplies because Martons Cars claim that the contract contained a disclaimer that “All goods sold are subject to their being stock (availability) when the order reaches our manufacturing site”.         This clause is unfair because firstly, it leads to a performance (late delivery) that is substantially different from contract agreement where both firms readily agreed and a delivery date was arranged for the end of the month. Secondly, it is not even reasonable for Martons Cars to expect Woods Office Supplies to still want the car given that immediate delivery was required for use by their sales representatives to go out on the road to sell current products. The late delivery negated the whole purpose and benefit of buying the car.

Conclusion

If Martons Cars refuse to refund or cancel the contract, Woods Office Supplies have grounds to sue for breach of contract on the following grounds

a)    The SGA 1979 Act (Section 28) means that Martons Cars did not only deliver late but the description of the goods was different (leather seats absent) as well as change in metallic paint colour being included in price but now being charged gives reasonable grounds too as it indicates change of warranty.

b)    Exclusive clauses such as the “stock availability” disclaimer is invalid based on the UCT Act 1977 because Martons Cars is using the clause not to perform the duties of delivering car before end of month as agreed which would lead to breach of contract.   

So late delivery as well as wrong product description means that Woods Office Supplies are have grounds to sue to cancel contract, claim refund and even damages if they so wish.

The most realistic outcome would be a cancellation of the contract and refund.

References

BBC (2012) Sale of goods, Available online at http://www.bbc.co.uk/programmes/b006mg74/features/consumer-law-sale-of-goods [Accessed 15 January 2013]

McKendrick, Ewan (2012) “Contract Law: Text, Cases, and Materials” 5th ed., OUP Oxford

Johnson, Howard (1996) "Recent developments in the law of sale and unfair contract terms", Managerial Law, Vol. 38, No. 2, pp. 1-32

Poole Jill (2010) Casebook on Contract Law, 10th Edition, Oxford University Press

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