Case Study 1Question 1
A Contract is a legally enforceable agreement which the court will enforce, this is an important definition because it’s worth bearing in mind that there is many type of agreements that the court will have nothing to do with. Any legal contract must contain certain elements, first it must contain an offer. The offer is what someone is going to do such as sell you an item or provide a service or just simply just pay you. Another element that they will have to understand is that the offer needs to be accepted therefore a contract is formed.
In this case study there is no contract binding, this may be referred to an invitation to treat. An invitation to treat can be refused therefore resulting in a binding in a contract not being formed. If you make an offer to someone you are indicating by words, writing or by your actions that you are bound on certain terms and should these terms be accepted by another person. Therefore if an offer has been accepted a contract is formed.
Fisher v Bell – A flick knife with a price label on it was displayed in a shop window, the shopkeeper was charged with the offence of offering such a knife for sale. The shopkeeper was found not guilty. Therefore an offer which the shop has rejected and it follows that there can be no contract.
Case Study 2
When entering employment an employee may agree to some restrictions being placed on his future employment or trade. Later the employee may feel the restriction is unfair and therefore might break it. In some circumstances it would be up to the employer to take him to court an interdict forbidding the employee to break the agreement. They will need to consider
The extent of the restriction in terms of area and population of the area
The extent of the restriction in terms of time
This refers to the case of (Stewart v Stewart) Ibn this case the court held that the agreement was fair and reasonable because the area of the restriction was relatively small in such a sparsely populated area.
In some restrictive agreement there may be a number of restrictions listed. The court has the power to sever these restrictions and pronounce certain ones fair and certain ones void This refers to the case of (Mulvein v Murray). So if the court can separate two restrictions it will. But the court does not have the power to reduce a restriction i.e if a restriction is made which is too wide then the court will make it void, it will not reduce
Tom is a car salesman who has worked at ABC Motors for 5 years and has been offered a position at their rival company. Tom has a clause in his contract which restricts him from working at competitors for 5 years. Tom wouldn’t have many secrets in the organisation and 5 years is an excessive amount of time therefore it will fail in court because it will become void Therefore Tom can happily work at the competitor .This refers to the case of (Bluebell Apparel Ltd & Dickinson) (1980) is this case Dickson agreed that he would not disclose any of his firm’s trade secrets nor would he work for any business competitors within two years of leaving Bluebell. The court held that the restriction was fair because the nature of Dickinson’s job was such that he would be in a position to harm his ex-employees.
There are 3 kinds of misrepresentation those being Fraudulent, Negligent and Innocent Misrepresentation
Fraudulent Misrepresentation – This is a deliberate attempt to deceive the other party and influence their decision to enter into a contract. The party making the statement is aware of the false nature of the statement while making it and is therefore dishonest and therefore fraudulent.
Voidable – In general, fraudulent misrepresentation will make a contract voidable unless it caused error in the substantial
Case- Derry v Peek – There is fraudulent misrepresentation where a person makes a false statement either –
Knowing It to be untrue or
Without belief in its truth or
Recklessly not caring whether it is true or false
It does not matter that there was no intention to cheat or injure the person to whom the statement was made there will be fraud if the statement is made without any honest belief in its true
In this case Derry v Peek, Peek received a prospectus of a train company which stated that due to a new law the company could begin to use steam or mechanical power instead of horses. After reading the prospectus Peek bought shares in the company thinking the company had the right to use steam and the mechanical power. The board of trade only permitted the company to use steam and mechanical power at certain points of its tracks. As a result the company folded and Peek filed a suit again Derry for fraudulent misrepresentation
Innocent misrepresentation – This occurs where an error has been induced by an inaccurate statement of fact made by the other party in the person who was making the statement honestly believed it to be true then this will mean it will be considered as innocent misrepresentation
Voidable – A contract induced by innocent misrepresentation is considered voidable
Case- Boyd & Forrest v Glasgow & South Western Railway – A railway company invited tenders for the construction of part of a railway line. The contactors claimed for an extra of £136,000 as they found more rock and hard substance in the ground than they anticipated due to the content of the borers. However the engineer had altered information because he honestly believed that it was wrong.
Negligent Misrepresentation – One party is under a legal duty not to make misleading statements to another party and fails to take reasonable care. As a result someone is induced into a contract on the strength of the negligent misrepresentation.
Negligent misrepresentation does not involve deliberate dishonesty but occurs where there has not been reasonable care in checking in the accuracy of the information given.
Voidable – Person can walk away from the contract
Case – Hedley Byrne & co Ltd v Heller & Partners Ltd- The Defenders (Bank) knew that their clients (pursuers) were relying on them to provide accurate information to form the basis of a decision as to whether or not to take over another company. They mistakenly gave the information about another customer who had a bad credit history. The deal fell through and the Pursuers lost a great deal of money
Tom is obligated to receive a full refund from Barry as he didn’t know the car was stolen and also the information given by the seller (Barry) was incorrect as his real name isn’t Barry and Tom didn’t know who he actually was which makes the contract voidable. Barry’s identity was an absolute material item of the contract because Tom would not have entered the agreement had he been aware of the deception
Morrison v Robertson – Robertson, A farmer was approached by an individual (later discovered to be name Telford) who wished to buy a cattle on credit. Telford stated he was the son of a man called Wilson with whom Morrison a dealt with previously. Morrison knew that Wilson to be a man for good credit. Morrison gave the cattle to Telford who then sold the cattle to an innocent third party. Morrison thought that he was contracting with Wilson’s son but unknown to him he was contracting with Telford. Telford’s identity was an absolute vital to the formation of a contract. Morrison would never have entered into the contract with Telford had he known his true identity. Therefore, the cattle had been returned to Morrison the true owner
Case Study 3
A breach of contract is where on party fails to fulfil his or her legal obligation under a contract
Tony and Jane have a contract where Tony will pay Jane £100 for her car and delivery. Tony pays the £100 but Jane fails to deliver. In this case there has been a breach of contract by Jane as she has failed to deliver the car.
Tony and Jane have a contract where Tony will pay Jane £100 for her car and delivery. Tony pays the £100 but Jane fails to deliver as the car has been stolen. In this case there has not been a breach of contract as the failure to fulfil the obligation was due to intervening circumstances which neither party had control over. This is known as a frustration
There is a breach of contract where one of the parties fails to fulfil his part of the contract. However this is no breach of contract if that failure is due to intervening circumstances which neither party has control over
If there is a breach of contract then the party not in breach will have the right to seek a remedy for the breach. These remedies include:
Damages are awarded as compensation if the person has actually lost money as a result of the breach then they will be awarded substantial or compensatory damages. In some cases, no actual loss may have occurred as a result of the breach however it is still possible that damages may be awarded for trouble and inconvenience. The actual amount of damages awarded depends on the amount of loss.
Case – Den of Ogil Ltd v Caledonian Railway Company – The Den of Ogil owned a ship which had broken a piston and was lying in Plymouth docks. They got another piston at Port Glasgow and had it sent by rail from there to Plymouth. They told the railway company that there was a big hurry but did not tell them such a large ship with large cargo and crew waiting on it. The piston was delayed by four days and Den of Ogil claimed against Railway for damages. The court held that the railway company was not liable for such a large amount because it had not been specifically clear enough to them how important the delay would be.
A remedy of damages may not be satisfactory for the party who has suffered. For example, if you’re having an extension built in your house and the builders pull out half way through then damages are not much good to you. A better remedy would be to force the builders to carry out and finish the contract. The court takes the view that the appropriate remedy is an action for payment to grant an order could leave to someone in contempt being imprisoned for a civil debt. .Specific implement is an order of a court which requires a party to perform a specific act. An example is having something very unique and not money value but is irreplaceable such which would make this remedy necessary such as your mother’s ring.
A specific implement case would be Anderson v Pringle of Scotland. In this case the employer attempted to ignore parts of its redundancy policy which formed a part of a collective agreement which had been incorporated into the employee’s contract. One of the employees raised an action for specific implement in order to force employer to the terms of the redundancy policy. The court held that the employer must follow the provisions of its redundancy policies which allowed the employee to get back into the business but afterwards was made redundant using the correct redundancy policy.
Rescission means cancellation. With this remedy the party who has been loyal to the contract has the right to cancel it if the other party has been guilty of a material breach of contract. If the breach is not material but only partial then the right of rescission does not exist. An example of this remedy is the (Graham and Co v United Turkey Co case). Graham entered an agreement with the Turkey Red Company which he agreed to sell cotton goods for them and no one else. He broke the agreement by starting to sell to another firm. This breach was seen as material and entitled Turkey red to cancel their contract which Graham
If a person has possession of an article on which he has been employed to do work then he can refuse to return the article to its owner until payment is made for the week work done. Examples of situations where lien could be used as a remedy for a breach of contract include, garage keeping cars, watch repairs keeping watches.
An example of a case is Haig-Boswell v Preston Case. In this case a tenant refused to pay his rent to his landlord until such time as the landlord completed repairs to the tenant’s roof which was a substantial amount of water in. It was the duty of the landlord to ensure that the tenant had a suitable property. Clearly the landlord was in breach of a contract and the tenant decided to suspend his duty to pay rent on a temporary basis until the repairs were carried out. The court held that the tenant was entitled to take this action against the landlord
The appropriate remedy for the case study is using a defensive remedy which is Lien. Martina couldn’t pay for the painting as she got carried away and starting bidding more than she had. Lien gives you the right to hold onto an item which is not yours. The actioner needs to give Martina the option to pay if not you can re-auction it and if the painting gets sold for less than Martina has bided for the actioner will send her a message to pay for the cost of the loss the painting made.