Contract Law As the basis of Business Law - Essay Example

1 Contract Law The law of contract is the basis of business law. This remains so despite a considerable erosion of the principle of the freedom of contract. In the nineteenth century this concept was a central component of the economic doctrine of laissez-faire. The laissez-faire theories dictated that market forces and enlightened self-interest rather than government intervention-would keep the economy working well. Under this doctrine the role of contract law was to provide a means for business people to enter into legal relations with each other-in short, to make a deal. (Graw) A G Guest in Chitty on Contracts, provides a workable definition of what a contract is, he says; a contract is a promise or a set of promises which the law will enforce' (Guest) In order for a contract to be considered valid, it must have certain components present. In the initial stage of advising Adam, I will examine the facts in my attempt to ascertain whether the required components for contract formulation were existent between Adam and Mark in the proposed sale of the land. (1) Intention- intention to create legal relations. (2) Offer of acceptance- an agreement arising from a meeting of the minds. (3) Form and/or consideration- consideration is the price for getting the other persons Promise. (4) Capacity- Capacity of the parties to enter into contractual relations. (5) Reality of Consent- agreement must not have been obtained by fraud or other forms of unfairness. (6) Legality- the subject matter or terms of a contract may be illegal at common law or by 2 Statute. (Guest) It is clear that components 1-4 were inherent of the agreement and points 5-6 of the component list were not evident. Moreover there was a legitimate offer made by Adam to Mark, to which they subsequently agreed verbally on price and terms of the contract. Albeit the communication of offer and acceptance were made verbally on the phone; the law has made exceptions in the acceptance of an offer. Acceptance is the words, writing or conduct of the offeree that signifies consent to the agreement proposed by the offeror. When we view The Sale of Goods Act 1979 Part II S4-How a Contract is Made- and s (1), the statute states the spectrum of contract formulation. Additionally, we find the principle of acceptance by conduct when we view Brogden v. Metropolitan Railway Co. [1877] 2 App Cas 666. Adam and Mark entered into a simple contract, which can be oral, written or both. Simple contracts can be held valid in court. Particularly in a business transaction; the court makes the presumption that the parties did have the intent to become legally bound. Of course the presumption can be disputed by either party, however the disputed party must proved to the court that his intent was not to be legally bound. Failure to convince the court, the court will then decide the case by means of the relevant Presumption. I would advise Adam that he has in fact created a binding contract with Mark. We find auxiliary conversations in Rose v. Crompton Bros. (1925). concerning the talk of not having a written and signed contract was of itself a recognizable legally binding agreement. The court concluded that contracts had been created, and the defendant in 3 failing to execute them, were in breach of contract. The question now arises as to when is the property to pass from seller to buyer The Sale of Goods Act 1979 S18 Rule 1 states: Where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery of both, be postponed. In consideration of all of the above, I would advise Allen that his contract with Mark and his negotiated gesture to purchase the property is valid and binding. That ownership of the property has in fact passed to Adam. In that Mark has attempted to nullify their contract, the SOGA 1979 provides Adam with four remedies; in that he has commenced construction, I would recommend that he (Adam) seek damages against Mark and forego the other three statute stipulated remedies. In the case of Bob's insistence that he has a binding contract. I view the situation thusly: Adam put out a tender enquiry and of course this falls within the category of an invitation to treat. According to the Hannah Blumenthal (1983) 1 AC 854, a transaction is an offer if it reasonably appears so on the factual circumstances, and the Carlill v. Carbonic Smoke Ball Co. (1893) 1QB256, we see an offeree believes it to be an offer. Also in advert, which is a tender. In the case of Crowshaw v. Pritchard and Renwich (1899) 16 TLR4, the plaintiff invited tenders for work and the defendant submitted an estimate'. It was held by the court that the estimate was an offer to carry out work capable of acceptance, and hence the formation of a binding contract. All things being equal, this should have sealed it for Bob since he was the sole respondent to Adams 4 tender. Except dam sent Bob a post, requesting a reduction in the price of his initial estimate. Upon receipt of Adams post requesting an estimate reduction, Bob was amenable, so he made the necessary adjustments and use the same method as Adam and posted his amended estimate. Bob made an error in the address and it took his post two weeks to reach Adam. During the interim, Adam not having heard from Bob, entertained another contractor and signed a contract. The prevailing question is; does Bob have any recourse I would advise Adam of the following: In Adams v. Lindsell [1818] 106 ER 250, the ruling states; and the law prevails that if the parties contemplated acceptance could be made by post then acceptance occurs when and where the acceptances posted and not when the offeror receives it. I would therefore advise Adam that he was premature in hiring Susie, because he has a binding contract with Bob. Now on the matter of Susie. Susie accepted the job to erect Adams building, however she delivered contracts (which were subsequently signed by Adam) that included a number of exclusion clauses. The stipulated exclusion clauses releases her from liability of any damage not directly caused by her company, even though the damage could be brought by a sub-contractor hired by her. In S (4) s (a) of the Unfair Contract Terms Act of 1977 states that only to business liability, that is liability for breach of obligations of duties arising from things done or to be done by a person in the course of a business (whether his own business or another's). The statute is clear, Susie's exclusion clauses in her contracts are not binding. Further the statute states in S 2 (2), In the case of other loss or damage, a person can not so exclude or restrict liability for negligence except in so far as the term or notice satisfies the 5 requirement of reasonableness. 112)- that a term which purports to exclude or restrict any relevant liability is not a term of the contract. Clearly, Susie's exemption clauses were not reasonable and we find an amplification of the statute in Mitchell (George) (Chesterhall) Ltd. V. Finney Lock Seeds Ltd. [1983], where the court held that, an exclusion clause must be reasonable to be effective. It would have been more appropriate for Susie to have obtained the appropriate insurance coverage versus incorporating onerous and unreasonable clauses into her contracts which are not binding. I will advise Adam to void his contract with Susie and file a negligent claim against her for damages to the building and also to seek damages for the time delays and the loss of anticipated earnings. Additionally, I will advise him to award the contract to Bob. This will surely avoid Bob from bring a law suit against Adam for violation of a statutory act and for breach of contract. Works Cited Adams v. Lindsell [1818] 106 ER 250 Blumenthal,Hannah [1983] 106 ER 250 Brogden v. Metropolitian Railway Co. [1877] App Cas 666 Carlill v. Carbonic Smoke Ball Co. [1983] 1 QB 256 Crowshaw v. Pritchard and Renwich [1899] 16 TLR4 Graw, S., An Introduction to Law of Contract, Topic 4, Book Company Guest A. G., Chitty Contract. London: Sweet and Maxwell Mitchell (George) (Chesterhall) Ltd. v. Finney Lock Seed Ltd. [1983] Rose v. Crompton Bros. [1925] The Sale of Goods Act 1979 Unfair Contract Terms Act 1977 Read More