Legal environment of Business and Employment Coursework Part A

Legal environment
of Business and Employment Coursework

Part A

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1)      The Unfair Contract Terms Act 1977 governs exclusion
clauses in business to business contracts. 
This can either prevent the clause of being of any effect in any
situation, or prevent it from having any effect unless the party, depending on
the exclusion clause can prove that the clause is reasonable via a test of
reasonableness (Jones, 2017 pg.175). This must prove that the term within the
contract is fair and reasonable, considering the circumstances that were
already known, or should reasonably have been known, or to have been in the
contemplation of the two parties when the contract was created (Jones, 2017,

2)      The
key difference between a condition and a warranty is that a condition is
defined as ‘a fundamental term of the contract’ (Jones, 2017, p.163), whereas a
warranty, is defined as ‘a minor term of the contract’ (Heath, 2017). This
therefore means that when a condition is broken within a contract, the innocent
party can claim compensation, and can choose to continue with the contract or
consider it to be at an end. (Heath, 2017). However, when a warranty is broken
within a contract the innocent party can claim damages, but the contract
between the parties will continue (Jones, 2017, p.163).

3)      Frustration
is a form of discharge of a contract, which is when the requirements of the
contract are at an end. Frustration, ultimately, is a fundamental change that
has resulted from no fault of either party. Frustration can only occur when the
change results in the fulfilment of the contract becoming impossible, illegal
or very different from what had formerly been settled upon (Jones, 2017,

4)      A
misrepresentation is defined as an incident where one party has made a false
statement of fact which induces the other party to enter into the contract
(Jones, 2017, pg.192). This false statement can be induced into the contract
orally, in writing or by conduct. There are three different types of
misrepresentation. The first type of misrepresentation is fraudulent
misrepresentation. This is where one party makes a false statement that they
know is untrue, or do not do not believe to be true. (Jones, 2017, pg.200)
Another type of representation is negligent misrepresentation. Once again, one
party makes a false statement, however this party believes the statement to be
true, despite having no reasonable grounds to believe its truth (Jones, 2017,
pg.200). Innocent representation is the final type of misrepresentation. This
is where a false statement is made by a party who believes it to be true.
However, unlike negligent misrepresentation, the party has reasonable grounds
to believe the statement to be true (Heath, 2017). 

5)      When
assessing satisfactory quality under the Sale of Goods Act 1979 s. 14, what needs
to be considered is whether there is an implied term that provides reason to
believe that the goods in question are of a satisfactory quality. According to
the Sale of Goods Act 1979, satisfactory quality can be judged on the good’s:
‘fitness for all the purposes for which goods of the kind in question are
commonly supplied, appearance and finish, freedom from minor defects, safety,
and durability’. If any of these requirements are not met, the purchasing party
can reject the purchased goods under the Sale of Goods Act 1979 for not being
up to satisfactory quality.




Part B

(a)    This
is a civil case.

(b)    The
claimant, O’Brian believed that he had won a scratchcard game in the Daily
Mirror on 3rd July 1995, there that he had won £50,000. The claimant
had bought a copy of The People on Sunday 25th June 1995, which came
with a card containing three red sections to use with that paper, three green
sections to use with The People on the next Sunday. It also contained two blue
sections, with one to be used with the Daily Mirror on the 26th June
and one to be used on the 3rd July. There was three ways of winning
the scratchcard game: matching 3 sums of money, matching two sums and the sum
announced in the newspaper for that date, or matching two numbers and matching
the number announced on the premium rate telephone number that was included in
that newspaper on that date. On the 3rd July, the claimants
scratchcard revealed two sums of £75 and two sums of £50,000, with the sum
published in the paper being £750. The claimant rang the ‘Mystery bonus
hotline’ which announced £50000 as the bonus amount for that day, leading to O’Brian
and 1472 others believing they had won this sum. MGN, stated that the high
number of winners was due to a printing error, with the game being designed so
that only one or two cards would win the £50,000 each week, with only 2 cards
eligible for the prize. However, there was a special draw for £50,000 as per
the rules and each of the people who believed that they had won would also
share £50,000 between them. The claimant therefore received £33.97, but did not
win the prize draw. O’Brian claimed that the rules should be omitted from the
case as they were not in the newspaper bought on the 3rd of July,
and that he should be awarded a sum of £50,000. However, MGN refuted this, referring
to a notice which told scratchcard players to see the daily mirror for all
rules. The courts decided that this was enough to provide notice to the rules,
meaning the rules were valid. This therefore meant that MGN won the case, as
the term they were relying on had been brought to the attention of O’Brian, and
was therefore incorporated into the contract.

(c)     A
case used as precedent in this case was Intefoto
Ltd vs Stiletto Ltd 1989 as both cases stated that the term must be brought
to the attention of the other party.














Part C

There are three ways that an exclusion clause can be
incorporated into a contract. The first way an exclusion clause can be
incorporated into a contract is by signature (Heath, 2017). Incorporation by
signature states that if a party signs a contractual document, they usually
have constructive notice of the terms included in the contact, and even if the
party failed to read the document and one party is unaware of the exclusion
clause that is included in this contract. An example of this can be seen
through the L’Estrange v Graucob
(1934) case. In this case, the claimant, L’Estrange, had purchased a cigarette
vending machine, and signed a contract that included ‘legible but regrettably
small print’ stating that ‘Any express or implied, condition, statement of
warranty, statutory or otherwise is expressly excluded’ (e-law resources,
2010). The claimant failed to read this small print. When the vending machine
didn’t work the claimant tried to reject it under the Sale of Goods Act. The
decision the courts came too was that the claimant was bound by the exclusion
clause, even though claimant had not read all of the document that she had
signed. This was due to the terms being agreed upon signature of the contract
(Jones, 2017, pg.169).

Another way that an exclusion clause can be included into a
contract is by reasonable notice (Heath, 2017). Incorporation by reasonable
notice states that an exclusion clause can be incorporated into a contract if
the party knows of it, or is provided with reasonable notice before the parties
enter the contract. Incorporation by reasonable notice can be seen in the case Olley v Malborough Court Ltd (1949). In
this case the claimants, Mr and Mrs Olley, had paid to stay the defendants’
hotel at the reception upon arrival. When they got to their room there was a
note containing the exclusion clause, stating that the hotel was not liable for
any articles lost or stolen. The claimants went out, locking the door and
leaving the key at reception, but upon return a fur coat had been stolen. The
courts concluded that the defendant’s exclusion clause was ineffective, as the
contact was made at the reception desk, and therefore reasonable notice was not
provided. This therefore meant that the theft was a result of the hotels
negligence, and they were liable for the loss of the coat (Jones, 2017,

Incorporation by previous dealings is the final way an
exclusion clause can be included in a contract. This is when parties have had
past dealings with each other, and the parties have received numerous copies of
the exclusion clause previously. This means the courts can come to the
presumption that the parties are aware of the exclusion clause, and can
therefore be incorporated into future contracts. Spurling v Bradshaw (1956) shows is an example of a case that
involves incorporation by previous dealings. In this case the defendant
delivered some barrels of orange juice to the claimant’s warehouse for storage.
The two parties had done dealings on numerous occasions in the past. When the
defendant collected the barrels, they were empty. The defendant refused to pay
the claimant for his services, and the claimant therefore sued the defendant.
The courts came to the decision that due to the previous course dealings, the
defendant was bound by the exclusion clause. The clause stated that the
claimant, Spurling, excluded liability for ‘for any loss or damage occasioned
by negligence, wrongful act or default’ (Jones, 2017, pg.172-173).. This
therefore meant that the defendant had to pay the claimant for his services.








Part D

A contract is a legally binding agreement between two or
more parties.  There are four essential
elements of a contract: offer, acceptance, consideration and intention to
create legal relations. An offer is defined as ‘a definite statement of terms
capable of acceptance’ (Heath, 2017). This must not be confused with an
invitation to treat, which is an ‘indication that a party is open for
negotiation’ (Jones, 2017, pg.94). An advertisement, such as goods displayed in
a shop window, is an example of an invitation to treat. The second essential
element of a contract, acceptance, is the ‘unconditional assent to all the
terms in of the offer’ (Heath, 2017). This means that both parties must agree
to all terms within the offer. The method of acceptance can often differ;
however, silence does not constitute to acceptance. Acceptance, along with an
offer, makes up the agreement stage of a contract. The next essential element
of a contract is consideration. This is often defined as the bargain element of
the contract as because both sides gain something of value (Heath, 2017). The
final element of a contract, the intention to create legal relations, is what
makes the contract legally binding. The agreement of the contract may ‘impose
legal rights and obligations’ (Jones, 2017, pg.119) on the parties involved in
the contract if they wish for it to be legally binding. This information is
needed when assessing whether Zak has a binding contract with Huddersford
Vintage Jewellery.

Ultimately, the core issue to assess when looking at the
case is whether Zak has a binding contract with Huddersford Vintage Jewellery.
It is clear to see that when Zak first spotted the necklace watch online, the
£7000 price place on it was an invitation to treat. Huddersford Vintage
Jewellery were inviting offers for the watch and the £7000 placed on it was a
pre-offer. This is a similar case to that of Fisher v Bell (1961) in that the display of goods, in this case a
flick knife, with a price displayed is deemed as an invitation to treat, rather
than an offer. This therefore meant that the defendant in this case had not
committed any offence under the Restriction of Offensive Weapons Act 1959
through the display of the good (Jones, 2017, pg.96). Another example of an
invitation to treat can be seen in the Partrige
v Crittenden (1968) case, where Mr Partrige placed an advertisement for the
sale of birds, and was subsequently charged with illegally offering the sale of
a bird. As this was an advertisement it was not considered an offer for sale,
and therefore Mr Partridge had not committed any offence (Jones, 2017, pg.96).

Zak responded to this invitation to treat with an offer of
£6000, and was therefore attempting to enter a contract with Ben and Perry. This
offer appeared to be accepted, with Perry drafting an e-mail to Zak, stating
that they Huddersford Vintage Jewellery would accept the offer. However, the
e-mail was not sent due to Perry’s lack of an internet connection. This
therefore meant that there was no communication of acceptance as the e-mail
would have to be received to be accepted. This therefore means that Zak and
Huddersford Vintage Jewellery had not been entered into a contract at a price
of £6500. The next day, Ben and Perry communicated a counter offer over
voicemail of £6500, with a deadline of 5:00pm the same day. A counter offer is
when one party replies to an offer with anther offer, containing different
terms (Jones, 2017, pg.104). This therefore meant that the original offer by
Zak of £6000 was rejected.

Ayesha than saw the necklace watch in the window of
Huddersford Vintage Jewellery. The price of £7000 would still be considered an
invitation to treat, as seen in the Fisher
v Bell (1961) case. She offered £6500 cash, which was accepted by Ben and
Perry, and the necklace watch was exchanged for the sum in cash. Zak heard the
voicemail at 10pm, and responded to the counter offer by text at 9:00am the
next day, the text being a form of instantaneous communication (Jones, 2017,
pg.109). By this time the offer had been terminated by lapse of time, which is
when the offer has expired at the end of a time limit that was included in the
contract, which in this case was 5:00pm on the 5th April, with Zak
replying on the 6th April. Ramsgate
Victoria Hotel v Montefiore (1866) is an example of termination by lapse of
time, with the defendant offering to buy shares in the claimant company in
June, but only heard back in November, where he no longer wanted to buy the
shares. It was concluded that there was an unreasonable delay in the acceptance
of the offer (Jones, 2017, pg.109).

It can therefore be concluded that Zak does not have a
binding contract Huddersford Vintage Jewellery, as he failed to respond to the
offer in time. Therefore, the offer had been terminated by lapse of time, and
despite not waiting for a response from Zak, Huddersford Vintage Jewellery
should face no repercussions from the sale of the necklace watch to Ayesha.
This would be the same even if Zak had sent his acceptance by post on 5th
April at 5:30pm. This is because the offer had still expired by this time.
However, if the letter was correctly stamped, addressed and in the postal
system by 5:00pm, under the postal rule the contract would be binding, and Zak
could take Huddersford Vintage Jewellery to court (Jones, 2017, pg.112).

























Reference List

(2010). L’Estange v
Graucob. Retrieved from

(1979). Sale of Goods Act 1979. Retrieved from

Heath, J.
(2017). Contract 1. PowerPoint slides. Retrieved from

Heath, J.
(2017). Contract 2(1). PowerPoint slides. Retrieved from

Heath, J.
(2017). Contract 3(1). PowerPoint slides. Retrieved from

Jones, L.
(2017). Introduction
to Business Law (4th ed.). Oxford: Oxford University Press.