Introduction to business law

Answer to Question #1

Eddie has a legally binding contract with Adele. Generally, price quotes are not offers for it is no more than an invitation to treat. The courts will look at the language used in the light of the circumstances in which it is used and into the subsequent actions of both parties to determine whether what is said by the seller is a mere quotation of price or an offer to sell as held in the case of Canadian Dyers Association vs. Burton 47 O.L.R. 259 (H.L). An offer is the manifestation of willingness to enter into a bargain, so that another person is justified in understanding that his assent to that bargain is invited and will conclude it (s.24 Restatement).

When he was given the price quotation for the piglet, he accepted the same when he manifested to her that the price was acceptable and insisted on its delivery on the given period. It can be gleaned from the communications made by herein parties their intention to enter into a contract. Under s.64 of Restatement, acceptance given by telephone or other medium of substantially instantaneously two-way communication is governed by the principles applicable to acceptances where the parties are in the presence of each other. Hence, if Eddie had intended to revoke the contract, he should have manifested the same on Tuesday. In the case of Megalift v Terminals [2009] NSWSC 324, the court ruled that both parties were already in negotiation, discussing terms and details such as transportation and delivery. These conversations involved quotations and although no fixed price was agreed upon, it was nonetheless a contract, which was legally binding. Moreover, her Honour disregarded the quotation for the purpose of a budget only. This did not prevent the parties from contracting.

Answer to question # 2.

Unfair Contract Terms Act 1977 (UCTA) places a number of restrictions on the contract terms businesses can agree to. Specifically, it lays down rules for the ways in which vendor businesses can use exclusion clauses to limit liability in certain areas. (Business Link, Buyers’ terms and conditions and unfair contract terms). The business selling the goods or services isn’t allowed to exclude liability for: death or injury – under any circumstances, losses caused by negligence – unless to do so is ‘reasonable’ and defective or poor quality goods – unless to do so is ‘reasonable’ (Ibid.) Liability for negligence that causes other types of damage are subjected to a test for “reasonableness” (Alistaire 2009, Exclusion clauses and unfair contract terms Part 2).  S.2(1) of the UCTA states that “A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.” Under s2(1) no one acting in the course of a business can exclude or restrict his liability in negligence for death or personal injury by means of a term in a contract or by way of notice (Law Teacher 2011, Exclusion and Limiting Clauses). Bambi cannot make reference to the notice on the desk that excludes or restricts its liability in case of claim for damages resulting from its negligence.

UCTA is the main statutory provision, which regulates exclusion clauses and can either render a term effective, ineffective or subject to the test of reasonableness. It applies to business liability as between businesses or a business and a consumer. Therefore, if parties are not acting in the course of a business, say for example a contract between two private individuals, they can exclude liability. UCTA applies to exclusion clauses in the course of a business in three situations:1. Negligence 2. Consumer 3. Standard Term Contracts (Gillhams Lawyers 2008, Business and Commercial Contract Terms).

Negligence is failure to use reasonable care. It is the doing of something which a reasonably prudent person would not do, or the failure to do something, which a reasonably prudent person would do under like circumstances. It is a departure from what an ordinary reasonable member of the community would do in the same community ( Lectric Law Library Lexicon 2011, Negligence).

Section 16(1) of UCTA specifically applies controls to a term of a contract, or a provision of a notice given to persons generally or to particular persons, [which] purports to exclude or restrict liability for breach of duty arising in the course of any business or from the occupation of any premises used for business purposes of the occupier (Black et al. 2009, The Unfair Contract Terms Act 1977 in the Court of Session par. 2).

Meanwhile, the terms of  S.17(1) of UCTA are to the effect that: “Any term of a contract which is a consumer contract or a standard form contract shall have no effect for the purpose of enabling a party to the contract—(a)  who is in breach of a contractual obligation, to exclude or restrict any liability of his to the consumer or customer in respect of the breach;(b)  in respect of a contractual obligation, to render no performance, or to render a performance substantially different from that which the consumer or customer reasonably expected from the contract; if it was not fair and reasonable to incorporate the term in the contract” (Ibid. par. 3)  S.17(2) defines a “customer” in  S.17(1) above as a party to a standard form contract who deals on the basis of written standard terms of business of the other party to the contract who himself deals in the course of a business (Ibid. par. 4).

Thus, sections 16 and 17 of UCTA focus on clauses, which seek to exclude or restrict liability in respect of any breach of a delictual, contractual or statutory duty (Ibid. par.5). Hence, Bambi is liable for the damages incurred by Adele under the provision of S.1, S.16 and S.17 of UCTA.

Answer to Question #3.

The Sale of Goods Act 1979 (SOGA) (as amended) is the main piece of legislation helping buyers to obtain redress when their purchases ‘go wrong’ (Business Link, The Sales of Goods Act 1979).

S.14 (1) of SOGA (as amended) provides that except as provided by this section and section 15 below and subject to any other enactment there is no implied condition or warranty about the quality or fitness for any particular purpose of goods supplied under a contract of sale. S.14 (2) states that where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality, except that there is no such condition—(a) as regards defects specifically drawn to the buyer’s attention before the contract is made; or(b)if the buyer examines the goods before the contract is made, as regards defects which that examination ought to reveal. S. 14(3) provides that where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known to the seller any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the seller’s skill or judgment.

These provisions of SOGA explain that ordinarily there is no implied condition that the goods supplied by the seller should be fit for the particular purpose of the buyer. The rule Caveat emptor applies instead It means that while buying it is the responsibility of the buyer to ensure that the goods corresponds to the particular purpose he want to meet (Nair 2008, Implied Condition in the Sale of Goods). However in the following situation the responsibility of the fitness as to Goods falls on the seller: a. the buyer make known to the seller the particular purpose for which he requires goods, b. the buyer relies on the skill and judgment of the seller, c. the sellers business is to supply such goods whether he is the manufacturer or producer or not (Ibid).

Applying these provisions of SOGA (as amended) on the situation faced by Beryll, the advice to her would be that Eagle Shop had breached the statutory rights. Sam expressly manifested the purpose to which the organic meat is to be used, and he relied on the statement of Beryll. As can be gleaned from the facts, Beryll made a statement that she was not sure whether the meat was suitable for the dog but added that if its safe for people then it is safe for the dog. There was reliance of skill or judgment here since Sam did not act on his own accord to choose the meat. Further, Beryll showed prime organic meat to Sam on display, but the one sold was taken from the fridge. Sam has not exercised the option to choose the meat cut. He just accepted what was given to him by Beryll.  Hence, Eagle Shop did incur breach of warranty of fitness when it was later found out that the meat sold to Sam was not organic and had bacteria.

In the case of Rinaldi v. Mohican Co. (225 N. Y. 70) it was held that even in such circumstances an implied warranty ensues if the seller’s judgment has been trusted for the selection of the brand or make. The customer will be taken to confide in ‘the skill and experience of the seller in determining the kind of canned goods which he will purchase, unless he demands goods of a definite brand or trade name as held in the case of Ward v. Great Atlantic & Pacific Tea Co. 231 Mass. 90.

The purpose to which such meat was to be used was specific enough since it is consumption of a particular breed of dog, which is a champion. SOGA provisions should be applied in relations to the provisions of Uniform Commercial Code (UCC).  S.2-315 of UCC requires that there must be an intended “specific use” of the goods, “peculiar to the nature” of the buyer’s particular needs, of which the seller must possess actual or constructive knowledge should be distinct to the ordinary use of goods as held in the case of Crysco Oil Field Services, Inc. v. Hutchison-Hayes International,Inc., 913 F.2d 850, 852 (10th Cir. 1990).

BIBLIOGRAPHY

Website with Authors:

Alistaire, May 19, 2009, Exclusion Clauses and Unfair Contract Terms (Part 2), Available at Reading Law Website, [Accessed on May 6, 2011], website: http://readinglaw.wordpress.com/2009/05/19/exclusion-clauses-and-unfair-contract-terms-part-2/

Gillian Black  et al. April 17, 2009, The Unfair Contract Terms Act 1977 in the Court of Session par. 2, Available at The University of Edinburgh School of Law, [Accessed on May 6, 2011], website: http://www.law.ed.ac.uk/ecclblog/blogentry.aspx?blogentryref=7751

sreekumar c. nair 11 September 2008, Implied Conditions on Sale of Goods, Lawyers Club India Website, [Accessed on May 7, 2011] website: http://www.lawyersclubindia.com/articles/IMPLIED-CONDITIONS-IN-THE-SALE-OF-GOODS–379.asp

Website with no Authors:

Buyer’s Terms and Conditions and Unfair Contracts Terms, Available at Business Link Website, [Accessed on May 6, 2011] website: http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1074405689&type=RESOURCES

Gillhams Solicitors and Lawyers 2008, Exclusion Clauses and Limitations of Liability in Business Contracts, Available at Gillhams Solicitors Website, [Accessed on May 5, 2011], website:  http://www.gillhams.com/articles/400.cfm

Law Teacher Law Essay Professional 2011, Exclusion and Limiting Clauses, All Answers Ltd. Website, [Accessed on May 6, 2011] website: http://www.lawteacher.net/contract-law/lecture-notes/exclusion-clauses-lecture.php

Lectric Law Library Lexicon 2011, Negligence, The Lectric Law Library Website, [Accessed on May 4, 2011] website: http://www.lectlaw.com/def2/n010.htm

The Restatement of Contracts, 1932, Section 24, American  Law Institute. Available at Lex Inter.Net Website, [Accessed on May 6, 2011] website: http://lexinter.net/LOTWVers4/restatement_of_contracts.htm

Sales of Goods Act 1979,Available at Business Link Website, [Accessed on May 6, 2011], website: http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1074027367

Uniform Commercial Code Article 2: Sales, Available at Cornell University Law School Website, [Accessed on May 7, 2011], website: http://www.law.cornell.edu/ucc/search/display.html?terms=implied%20warranty%20of%20fitness&url=/ucc/2/article2.htm#s2-315

Cases Cited:

Canadian Dyers Association vs. Burton 47 O.L.R. 259 (H.L)

Crysco Oil Field Services, Inc. v. Hutchison-Hayes International,Inc., 913 F.2d 850, 852 (10th Cir. 1990)

Megalift v Terminals [2009] NSWSC 324

Rinaldi v. Mohican Co. (225 N. Y. 70)

Ward v. Great Atlantic & Pacific Tea Co. 231 Mass. 90.

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