Legal Systems and Contract Law in the UK - Essay Example

?Part This section advises Calum on whether his acceptance of the offer of Tom through his post constitutes a valid contract or not. It identifies if the trend of events result in some rights for Calum and how those rights can be enforced in English and Scot Laws. The main issues that need to be critiqued in this analysis include: 1. The rights of Calum within the 30 day period that the offer was valid. 2. Whether the offer was still valid when Calum sent the mail asking for further information or not. 3. Whether the second mail sent on the 29th with an unconditional acceptance created a valid contract or not even though it was received on the 2nd of September – two days after the deadline. 4. The position of Constance in the existing circumstances and its impact on Calum. 5. Possible remedies available to Calum RULES In order to conduct a critical analysis of the case at hand, it is necessary to examine the relevant components of the English and the Scottish legal systems that differ. However, to set the discussion rolling, it is necessary to examine the general rules that define the concepts of offer, acceptance and contracts in both jurisdictions. English Common Law In order to form a valid contract, there must be an offer and an acceptance. In the general sense, an acceptance must match the terms of the offer and it. The specific method of acceptance must comply with the required method of acceptance1. Thus, if the offeror specifies that an offer must be accepted via one medium of communication, that medium must be used to accept the offer. In other cases, an equally appropriate method of communication of acceptance to the offeror might be sufficient to create a valid contract2. There is a general issue with acceptance of contract offers by post. This is because when a person accepts an offer via post, the offeror might not be aware. Some issues came up in relation to this trend of affairs and hence, a number of significant rulings came up which defined the postal rule in contract law. The postal rule states that an acceptance is effective the moment an offeree posts a document asserting his acceptance3. A lost letter or a delayed letter does not affect the validity of the acceptance4. However, in modern times, the postal rule applies where postal acceptance is specified as the means of accepting an offer5. Offer In the famous case of Routledge V Grant, it was accepted that an offer is valid until there is a revocation. In the case at hand, an offer was made by Grant to lease his premises to Routledge and he stated that he would keep the offer opened for 6 weeks. However, in the third week, Grant revoked the offer and sold it to another person. It was held that there was no contract between them and Grant could revoke the contract at any time and sell it to anyone he pleased6. This is the general law, however there are some modifications under Scottish Law in this. However, in Byrne V Van Tienhoven, it was established that revocation must be communicated to the offeree7. How an Offer May End It is a general position in English law that request for further details does not mean a rejection of the offer8. However, the lapse of reasonable time or specified time of the offer can render it invalid9. Also, failure to meet a given condition of the offer can render it terminated and the offer will not be available anymore10. A counter offer renders an offer invalid, however, in the case of Butler Machine Tools V Ex-Cello11, the House of Lords held that a counter offer creates some kind of bargaining which they called a “battle of forms” in which the “last shot wins”. Scottish Civil Law The relevant aspect of the Scottish civil law that is relevant in the law of contract relate mainly to promises, counter offers and remedies. They are discussed below. Promise A promise seeks to invoke a moral rule that obliges the promiser to keep his word. In most jurisdictions including English law, a promise invokes nothing more than a mere moral obligation which is not enforceable in court. However, promises have legal significance in Scotland. One of the authoritative sources of Scottish law is the Institutions of Law states that “a promise is pure and binding without acceptance, while a contract needs offer and acceptance”12. This means that a promise in iteself creates an enforceable right that can be exercised by the promisee. To this end, Scottish Law makes a distinction between a contract and a promise. This has been the ancient position to-date however, the Requirements of Writing (Scotland) Act 1995 makes it imperative for persons who seek to enforce promises to show the contract in written form. This is to prevent ambiguities. The exceptions are promises made in an ongoing business relationship or if the promisee acted or refrained from acting in reliance on the promise with knowledge and acqueisence of the promiser13. Hence, a promise can be enforced when documents are presented as per the Contracts (Scotland) Act 1997. Counter Offer Constitutes Rejection The Contracts (Scotland) Act of 1997 states that a modification of the terms of a contract or failure to meet the exact terms of a given contract renders the offeree's response a counter offer14. In Scottish Law, the case of Philip V Knoblauch established that a counter offer is a rejection of the offer. Remedies In Scottish Law, the principles of Equity are not really enshrined. Due to that, equitable remedies are not available. The concept of Specific Performance which is an equitable doctrine which requires the party in breach to perform his primary obligation under the contract is non existent in Scottish law. In English law, it is invoked where the circumstances deem it necessary15. In Scottish Law though, there is the legal order compelling performance/specific implementation16. There are categories of cases that can be refused. The order of specific implementation can be refused where the primary obligation is not possible or where other options exist17. Where it exists, an innocent party must choose between damages and specific implementation. ADVISE In English Law, it appears that the precedence of Routledge V Grant gives Tom the right to revoke the offer at any time within the period that it was opened. However, he is bound to disclose the revocation when he does so to the person for whom the offer was made. This is because he had specified a postal acceptance and defined the timeframe. Hence, it was reasonable to communicate the revocation before revoking it. From the case, though, the acceptance of Calum via post on the 28th created a contract. The request for information about other things was somewhat a part of the battle of forms and kept him in contention for a contract. This was consolidated by an unconditional acceptance posted on the 29th of August. The earlier letter that was sent on the 28th is not tantamount to a rejection in English law. This is because there is a general legal rule that request for further information does not constitute a counter offer. This implies that in English Law, Calum's acceptance is valid. And the date of receipt of the letter is not material. Hence, Calum can go to court for an order of specific performance which will compel Tom to produce the car from Constance.. In the strict sense of the Scottish Law, Calum does not have a valid contract because the mail he sent on the 28th was a conditional acceptance which is a counter offer and hence a rejection of the offer. Thus, there is no contract between Calum and Tom since the initial contract was rejected by the letter dated by the 28th. This gave impetus for the formulation of a new contract. However, Calum has some right to enforce the promise made to him in Scottish Law. This is because Tom promised to keep the offer opened for a 30 day period. Hence, the sale of the car before the promised duration was a breach of the promise. And Calum can make some demands on the basis of the promise. In that sense, he can argue that some kind of promise existed which was not revoked expressly to him. Thus, the second unconditional letter had a legal ground. Thus, he can sue for specific implementation or claim damages for the breach of the promise. Part 2 In this case, Ian has sold a piano to Shiela, a fellow music student. In the process of formulating the contract, a number of issues that constitute some kind of claim under misrepresentation. The main issues in contention include: 1. Whether claims on fine tuning, year of manufacture and usage of the piano by Elton John were misrepresentations or not. 2. The significance of Shiela's failure to read the document on the piano before signing the contract. 3. Possible remedies for Shiela. English Common Law A misrepresentation is an unambigious, false of fact or law that is addressed to the party misled, which is material and which induces the contract18. A misrepresentation is therefore a major statement made by a party to the contract which was not true which formed part of the pre-contractual negotiations. In order for a misrepresentation to be upheld in court, there are two tests that the claim must pass. First of all the statement must a statement of fact and the innocent party must have relied upon the statement to enter the contract19. This makes the misrepresentation an operational misrepresentation. However, it is clear that if the scope of misrepresentation remains broad, there will be a wide range of claims that will be brought up by people against businesses. For instance, there will be many claims against businesses for the claims in their adverts and many opinions can be construed negatively and this will harm the world of commerce. Thus, the courts insist that misrepresentation applies only to misstatement of facts and sometimes law. English law specifically states that misrepresentation does not cover the following: 1. Mere puff: This include vague commendatory statements that are not promises nor part of the contract. 2. Opinions found to be false: This involves the subjective views and other general opinions that were later unfounded. 3. Statement of intention: These are promises of intentions that are not factual nor incorporated into the contract terms. Hence, there no basis to call it a representation and hence, its falsity does not make it a misrepresentation. However, In English Law, there could be fraudulent misrepresentation that is dealt with under the Misrepresentation Act 1967 and the Fraud Act 2006. This include claims that are made with the view of deceiving the other party. When fraud is proven, the innocent party can rescind the contract. Negligent misrepresentation has its root in the case of Hedley Byrne V Heller20. The case indicated that a statement made negligently or recklessly by one party which is relied upon by the other can be actionable under tort law. However, in order for this to happen, there must be a “special relationship” between the two parties. The remedy for misrepresentation is that it renders the contract voidable and the affected party can rescind the contract21. In English Law, a person might also sue for damages. These damages depends on whether the misrepresentation was innocent, negligent or fraudulent. Also, it will depend on whether the misrepresentation was one of fact or one of law and the reliance placed on the misrepresentation by the innocent party. Scottish Civil Law In Scottish Law, misrepresentation exists in the same way as it exists in English Law. However, the principal difference lies in the liability that the two jurisdictions place on parties in contracts to act in good faith. In Scottish Law, parties have a pre-contractual obligation of acting in good faith and failure to do so comes with automatic damages. In Scottish Law, the innocent party must seek reduction if the other party forms a contract in a manner that lacks good faith. However, after the contract is reduced, the contract is valid but not voidable. In Scottish Law, it is also apparent that a court cannot order payment of damages in place of reduction. Reduction is an automatic fate that a contract formulated in bad faith faces. Reduction in Scottish Law leads to restitution. Reduction is very distinct from rescission. Reduction puts the parties in the position that they were before the contract was formed. It puts the parties in a place as if the contract never existed. Rescission on the other hand absolves future performance. In the case of fraudulent misrepresentation, the innocent party can seek reparation in addition to reduction. The reparation is some kind of compensation that is given in addition to the fundamental things that were exchanged in the contract. Reparation is claimed through delict or what is known as tort in English law. In Derek V Peek22 it was held in Scottish law that misrepresentation of facts may be deemed fraudulent even if the defendant believed it to be true at the time if it was not reasonable for him to view it as true. However, if a fraud cannot be proven, the claimant's remedy will be reduction. However, according to the Law Reform (Miscellaneous Provisions: Scotland) Act 1985, negligent misrepresentation does not lead to automatic damages23. However, fraudulent fraudulent misrepresentation creates automatic damages or reparation. Fraudulent misrepresentation leads to reduction of contract and delictual damages in respect to losses from the transaction. Negligent misrepresentation leads to the reduction of the contract and in some cases, foreseeable losses that occurred as a result of relying on the information. In the case of innocent misrepresentation, there is a reduction of the contract and restitutio in integrum or reduction to the original condition or term. ADVISE TO SHIELA It is apparent that Shiela relied solely on the information that was given to her by Ian before purchasing the piano. Shiela did not read the terms of the contract before signing it. This indicates that the main representation she relied on was the representations that Ian made to her concerning the piano. Hence, she can take action in various ways and forms. In English law, she has the option of going for a rescission and/or claiming damages. She can claim rescission of the contract on the basis of negligent misstatement which can be construed as statements of facts because that was effectively, the only reasons why she bought the piano. The fact that it was fine tuned by a professional and had a lot of extra keys and year of manufacture became the sole “truths” that she relied upon. Since these representations turned out to be false, she has the right to ask for the contract to be rescinded. This gives her the right to return the piano for her money in the contract. The second issue relates to damages for deception in English Law. According to the Hedley Byrne principle, there was a special relationship between Shiela and Ian. Shiela can make a claim on the grounds of Section 2 of the Misrepresentation Act of 1967. This is because it appears that Ian set out to make the claims consciously and falsely to induce her to buy the piano. However, Ian can argue that those were mere puffs and opinions that he believed to be true. In this case, Shirley might have some difficulties trying to prove that some of the statements like the usage by Elton John that she does not know and the year of manufacture were both relevant. Ian can also claim that she signed a contract and was bound by the terms in the contract and not what he said in passing. Thus, it is conclusive that a claim for damages in English law could succeed, but it will be quite difficult and Shirley will have the burden of proof that the statements made by Ian induced her to enter the contract. In Scottish Law, Shirley can seek reduction on the by proving that Ian failed to act in good faith. Although this will not make the contract invalid, it will be voidable she will be entitled to restitution. And Shirley can decide whether to continue with the contract or not under better terms. Thus, she can return the piano to contract and claim her money and decide what amount is fair for the claim. After reduction, Shirley can then seek reparation under delict. This will mean that she will have to show that the statements made by Ian were fraudulent. The principle of Derek V Peek indicates that even if Ian believed the statements to be true when it was not reasonable for him to believe them, Shirley can claim reparation. This will be in the form of damages in relation to loss and costs of transaction that Shirley suffered. Ian can defend himself by reducing the class of the misrepresentation to negligent misrepresentation or innocent misrepresentation. This will make him liable only to the losses that were foreseeable as opposed to all losses if Shirley can prove fraudulent misrepresentation. Bibliography Books Ewan McKendrick. Contract Law (9 Edn London: Palgrave Macmillan, 2011) Martin Hunt. Law of Contract (4 Edn, London: Sweet and Maxwell, 20110 Journals Leonard Vagni (2011) “The Enforceability of Promises in Scotland and in the European Contract Law: A Comparative Analysis from an Italian Perspective” Comparative Law Review 2(1) pp1 – 20 Robin MacPherson and Peter Webster. “Scots and English Contract Law: False Fields” Journal of Contract Law Vol 16(2) pp391 – 395 Cases Adams V Lindsell [1818] EWHC KB J59 Beswick V Beswick [1968] AC 58 Butler Machine Tools V Ex-Cell-O [1979] 1 WLR Byrne V Van Tienhoven [1880] 5 CPD 344 Derek V Peek [1889] All ER 1 14 App Case 337 Financings Ltd V Stimson [1962] 3 All ER Hedley Byrne V Heller [1964] AC 465 Holwell Securities V Hughes [1974] 1 WLR 155 Household Insurance V Grant (1879) 48 LJQB 577 Long V Lloyd [1958] 1 WLR 753 Manchester DCE V Commercial and General [1969] 3 All ER 1593 Philip V Knoblauch [1907] SC 994 Ramsgate Victoria Hotel V Montefiore [1866] LR 1 Ex 109 Routledge V Grant [1828]6 LJCP 166 Stevenson, Jacques and Co V McLean [1880] 5 QBD 346 Tinn V Hoffman [1873] 29 LT 271 Statutes Contract (Scotland) Act 1997 Misrepresentation Act 1967 Requirements of Writing (Scotland) Act 1995 Read More