Requirements in formation of a valid contract
Contracts are legally binding deals involving people in law context; they give guidelines for deals involving different parties. There are unilateral contracts also known as one sided whereby an obligation is assumed by only one party including the promise to give a gift or to pay. It is typically an offer made to the general public for instance in Felthouse v Bindley’ (Stone, 56). Bilateral is a two way contract based on a promise made between parties to take an obligation to each other and come to a conclusion after an agreement is reached by a type of exchange of such promises.
BASIC PREREQUISITES OF ENSURING VALIDITY OF CONTRACTS
- Intention to enter into a lawful relationship. It is commonly assumed that when two parties are carrying out a business transaction, they must have an intention to enter into a contract, which binds them legally. This means that incase two individual signs a contract involving any business activities then each party may sue the other if there is no fulfillment of the contractual provisions. However, words such as “subject to contract” can be printed on documents to imply in legal terms that the document is not a contract and all its contents are only enforceable by a subsequent contract. In addition, words “without prejudice” are used to point out that contents of a document do not legally bind (Antonucci 67).
- Offer. This is the expressed readiness to perform an act, which is successively accepted unreservedly by the other party resulting to a contract. If an offer is not specific about a particular period, its validity takes a practical duration prior to its withdrawal or cancellation by the offerer (Antonucci 67). The person presenting an offer can keep away from possible disagreement by stipulating the time limit during which the offer is acceptable and being silent is also not judged by the offerer as a way of consenting to an offer. There is a difference of an offer and “invitation to treat” whereby invitation to treat simply makes invitation to individuals to make offers but is not in any way an offer (Antonucci 67). For instance, tender invitations, exhibiting goods on shops shelves, advertising goods and services in print and visual media results to invitation to treat.
- Acceptance. Contracts are only formed after the individual to whom it is made (Poole 39) acknowledges an offer. Acceptance could be made in writing, spoken or by conduct where the contract has allowed acceptance and performance of contractual duties to be carried out simultaneously. The acceptance is recommended to be clearly specified and agreed upon by persons entering into contract. If the offeror does not specify the method of acceptance then there are rules that may apply which include: postal rule which dictates that if post can be reasonably used for the process of offering and acceptance, a contact is created at the moment of posting acceptance letter even if the letter is not delivered due to its loss in the post. Receipt rule indicates that validity of acceptance is considered when message sent by fax is delivered even when offeror does not manage to read it right away (Poole 42). It is significant to note that partial acceptance results to a “counter offer” whereby if only some terms in an offer are accepted by one party, the party is not accepting the offer but creating a new offer to the other party for example Adams v Lindsell (Poole 42).
- Consideration.This is economically quantifiable loss to persons making a particular promise or the gain given to the other party, which can be in form of commodities, cash and services (Poole 56). When an agreement is arrived at a price below the prevailing market value, the seller cannot sue later to claim the balancing amount. Gifts and promises do not contain consideration exchange which is mutual and therefore are not enforceable in law (Poole 56).
- Capacity. Individuals who are not lacking in legal capacity can only make viable contracts; persons like minors and mentally ill people do not have capacity to enter into contacts. However there is an exception to this rule when the contract involves provision of necessities which are goods or services required by the minor for continuity of life at the time of the sale or delivery.
- Advice. The government gave an offer that it would give a reward for any information volunteered on importation of ivory products without a license. The offer given was an invitation to treat through the advertisement in the newspaper; however, the offer was sufficiently specific that the terms of agreement could be easily identified and consideration for this offer was well stated that a reward of $100,000 was to be given (Stone and James 146). Dave accepted an offer a month after the government stopped paying the reward, his acceptance was through performance where he provided the information required by the government (Stone and James 146). Dave accepted the offer after there was a lapse of time of the offer made by government; therefore no valid contract was formed between him and the government.
1b) Ways in which the law approaches the issues of consideration, intention to create legal relations and the capacity to contract
The rights and liabilities of parties entering into contracts depends on how they go about preparing an offer and acceptance, there are also rules that are applied in determining consideration, various intentions and capacity of persons when entering into contracts. It is important that law of contracts and details of elements involved in an agreement held between parties reflect the rules applied in contract law in terms of economic loss by one person and economic gain by the other and consequences thereof (Stone and James 146). When determining the intent to create lawful relations it is important to understand that law categorizes agreements into social, domestic and commercial business. Social and domestic agreements are mostly between family members and will not be intended as legally binding since they do not have an intention to crate legal relations. However, those agreements involving use of letters and documents like in business cases help the courts determine if there was an intention to enter in to contracts. An approach used when entering into an agreement, which brings out a bargaining concept is a measure to test the enforceability of treaties. In a legally binding contract offer, acceptance and consideration are elements, which should be considered together when bargaining an agreement. An agreement is also binding if it is in writing and expressed to be so, legal capacity of party involved into an agreement must be considered (Stone and James 146). An agreement is not legally binding if party involved is a minor referring to anyone less than eighteen years of age and a mentally incapable person. It is explained in the Minors Contract Act 1987 that the contract done by the minor with an adult may be binding only on the adult and capacities of certain people have to agree with each other must be lawful and fair. In this situation, the contract consideration was in terms of $100,000 reward, there was intention to form a contract by the government and Dave had an intention of accepting the offer. Both parties had the capacity to enter in to an agreement due to the reason that no minor or mentally ill persons were involved.
T2 – 2a) An Exclusion clause and effect of a valid exclusion clause
An exclusion clause recognizes the potential breach of contract and then excludes liability of one party completely for particular outcomes of the breach. It is a kind of an exemption clause utilized in contracts which is created in a way such that it only require one of the parties to ensure reasonable care in performance of their duties. There are also situations where exclusion clauses are excluded and clauses also confines parties to enter in to contracts within specific rights where in case a party relies on an exclusion clause to be exempted from liability, they need to draft an exemption clause carefully. If there are, ambiguity in terms the courts may assist in interpreting the provisions strictly against the party relying on the exclusion clause (Lunney113). The clauses are valid if they have been properly included in a contract are not in any way contrary to law (Lunney113). The effects of a valid clause is that a party choosing to apply it have to prove to the court of law that it was valid in the situation in which it was applied and may be relieved of all liabilities arising from an act which applies an exclusion clause.
2b) Standard form contract, business examples of standard form contract and its regulation
Standard Form Contracts are agreements that make use of standardized, non-negotiated provisions, normally in preprinted form and are referred to as “boilerplate contracts,” “contracts of adhesion,” or “take it or leave it” contracts (Winfield 131). The terms, often portrayed in fine print, are drafted by or on behalf of one party to the transaction; normally the party with superior bargaining power who routinely engages in such transactions and the terms are not negotiable by the consumer (Winfield 133). Business to consumer contracts are mostly the examples of standard form contract, they play an efficient significant role in distribution of a large number of goods and services (Winfield 137).
The contracts have the ability of reducing transacting costs by getting rid of the necessity of involving negotiations of many details of a contract every time there is sale of a product or provision of service. There is presence of bargaining powers which are not equal between the parties may have the ability to deceive or exploit the consumers. For instance, where a regular consumer and a multinational company salesperson enter into a contract, the regular consumer will be in no position to negotiate the standard terms (Winfield 141). The corporation’s representative may also not have the authority to alter the terms although both parties have the capability to understand the terms included in the final print (Winfield 141). Corporate lawyers who are not close to the place the concerned consumer do the drafting of these contracts and supplier transactions take place. The drafters may present the contacts with some attractive terms which mostly interests the consumers like price and quality while on the other side include one sided term in the final print that is beneficial to sellers which are not likely to be read or understood by the consumers.
The consumers may even not see the contract until the transaction has occurred, in some instances, sellers take advantage of the knowledge that consumers will not read or make decisions on these unfair terms. The small or virtually illegible print, legal and professional language does not make it easy to be understood. Others are long and hence tedious to read (Winfield 138). The contracts should therefore be regulated to protect consumers and suppliers who use professionals to draft the standard form contracts on their behalf and give consumers limited freedom of choice and little room for negotiation as the terms are so standard across the industry or the products they want are only supplied by particular traders (Lunney 209).
2c) How courts and statute ensure exclusion clauses are fair and reasonable
The law tries the best it can to ensure there is a level playing field in a situation where an exemption clause is being applied. A party relying on an exemption clause has to prove that the other party specifically gave an approval of the exemption clause during the time the agreement was made (Kuhnel-Fitchen & Tracey 89). The statutes have given main provisions, which include; liability for an individual injury or loss of life resulting from negligence cannot be excluded, the terms included in an exemption clause have to be reasonable and if the court is of the view that the terms are unreasonable the exemption clause will be void. There is no exclusion of liability for supply of defective goods to customers and contracts cannot be changed in favor of one party without the agreement of the other (Kuhnel-Fitchen & Tracey 89).
2d) Sea Restaurant reliance on the exclusion clause
Sea Restaurant will not be able to rely on this exclusion clause because there are rules that apply to the exclusion clause. Specifically referring to this case an exclusion clause cannot exclude liability of personal harm to an individual due to negligent acts. The clause ought to be more reasonable and that it does not apply if defective goods are being offered to consumers. The restaurant cannot therefore be excluded from liability of causing harm to their customers resulting from their negligence act of selling bad food. This term in this clause was also not reasonable since there ought not to have any situation that can cause damage or loss to the customers in the restaurant.
T3 – 3a). Requirements for establishing a claimant prove of negligence requirements
A claim in negligence is also a claim in tort; negligence has the capability of providing remedy for three different types of harm such as injury, damage to property and economic loss. To successively establish claim in negligence, the claimant has to satisfy some basic requirements that, the defendant owed a duty of care which is a duty recognized by law, requiring compliance with a particular standard of conduct for the protection of others against unreasonable risk. Second, duty of care was violated by defendant implying they did not obey the rules essential for standard care to the claimant (Cooke 81). Thirdly, breach of duty of care gave rise to damage experienced by claimant such as personal harm, damage to assets or financial loss and finally, the damage suffered was not remote (Cooke 81).
By successfully fulfilling these requirements, a claimant will have a valid claim in the tort of negligence and for anyone action to be judged as negligent there must be an assumed duty, which ought to have been exercised with care (Cooke 83). In this case, duty is an obligation identified by law to obey the rules of a particular standard for guarding others against risk. An example of a well known test of the duty of care is the ‘neighbor test’ as shown in the English case of Donoghue v Stevenson AC 562, whereby, an argument was made that persons must take reasonable care to avoid acts or omissions which can be reasonably foreseen to likely injure one’s neighbors. ‘Neighbor’s meant individuals who are so directly affected by the act, or its omission, such that a defendant should have given reasonable consideration to the effect of the act in question. The test is regarded as a general rule due to several circumstances under which negligence in conduct can arise (Cooke 85). Failure by an individual to take care in ensuring there is no unreasonable risk of predictable injury to others is essentially what is referred to as negligence (Cooke 85).
3b. Difference between the tort legal relation and the relationship in contract law
The main difference of a tort legal relationship and contract legal relationship is consent where in contract relationship the parties involved agree to enter into a contract agreement with their full knowledge and with no coercion. Each party has to also give consent to contract result stated in the particular contract (Stone and James 52). Therefore, damages in a contract claim usually have to do with a mistake or a misunderstanding between the parties. This is because they are typically aware of what they are dealing with in the contract but tort legal relationship is not based on consent (Stone and James 52).
Torts generally involve an intrusion by one party into the safety, health, profit, or privacy of the victim and if the victims consent to the tortuous conduct, it can serve as defense that will hinder them from recovering damages. This distinction regarding consent is reflected in the way that courts grant compensation in which case, in contracts the purpose of damages award is to reinstate position of parties before the occurrence of the breach. Torts claim, payment of damages is normally awarded to compensate losses incurred or suffered by victims and penalizing damages are sometimes awarded in a tort suit in order to discipline the defendant but punitive damages are rarely issued in a contracts claim (Stone and James 52).
T4 – Ta) Vicarious liability and rules applied by the court in deciding if the blame for a negligent act can be shifted from the employee to the employer.
Vicarious liability occurs in circumstances whereby individuals are taken to be accountable for actions or that do not belong to them. Employers may take responsibility if their employees perform actions which results to legal liability as long as there is prove they happened while performing their employment duties. The court uses “let the master answer” principle, which relies on principal, and agent association in which case employers are the principals and agents are employees. Under this set guidelines, the lacking duty of care liability is passed from worker to boss in circumstances, which the boss owes a duty to other individuals.
The doctrine also applies if the employees’ negligence happens within the scope of their employment (Elliott and Frances 267). Agency relationship principle forms the basis of charging employers by courts of law for their workers legal responsibility in tort of negligence. Respondent superior doctrine is applicable only if employee commits tort in the capacity of their job whereby the jury in a court of law is responsible for establishing whether the worker acted within a workers employment scope.
Employees’ independent self serving acts which do not result to facilitation or promotion of the employers business relieves an employer from any liability arising from such actions. However not unless these acts are deviating so much from the relationship of employment, they cannot be taken to be outside employment scope (Elliott and Frances 267).
4b.Application of the rules on both negligence and vicarious liability to consider the one liable for Ada’s injuries
Under the rules of negligence Ada could prove that she was owed a duty of care, the duty of care was breached which also resulted to damages. Under tort law the claimant therefore has legitimate claim for neglect from both the employee and employer. The claimant has the right to be compensated for the personal injury inflicted on her due to negligent act whereby the defendants did not take reasonable care to ensure duty of care was not breached. Mike’s negligence when using the hairdryer caused injury to his client however his employer Milky salon is vicarious liable under the rules of vicarious liability where an employer is liable for the actions of the employee since the employee acts on behalf of the employer as the agent. The injury to his client Ada also happened within the scope of the duties in his employment and the employer Milky salon therefore has to take the full responsibility of his actions.
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