Legal Issues In Relation To The Contract

‘Crooked, Shifty & Dodgy’ have just been offered a contract to act as accountants to ‘Build ‘n’ Go’. It is essential to write a report to explain a number of specific legal issues in relation to the contract before accepting the offer of ‘Build ‘n’ Go’.

An offer is an agreement, either implied or expressed, made by an offeror to commit, or not to commit, certain behavior in the future. In order to legally bind an offer, the offeror must have the intention to make an offer in the first place, and the terms of offer shall be clearly defined and communicated to the offeree. With clear intention to make an offer, however, courts are may add a missing term.

Fisher v. Bell 1960 is a famous case that would explain clear of offer for sale. The shopkeeper displayed a flick knife in the window of the shop with printed words on “Ejector knife”. The company was then charged with offering for sale a flick knife, which violates to the Restriction of Offensive Weapons Act1. The court decided the shopkeeper was not guilty because the displaying of the knife in the shop window was just an invitation to treat and it is not an offer for sale the acceptance of which constitutes a contract by the definition of the Act of 1959.

Invitation to treat is not an offer. It only invites offer. Different types of invitations are as follow:

In the case of merchandise’s advertisement, which would be an invitation to treat, only invites potential buyers to make an offer to buy certain merchandises at the price advertised.

In the case of auctions, the owner is only expressing a willingness to sell instead of making an offer. In an auction with reserve, owner can withdraw an item before it is officially sold by the auctioneer. Similarly, a bidder can revoke a bid as he/she is not accepting any offer. A bidder is an offeror who can cancel the offer, the bid made. The auctioneer on the other hand can reject the bid before striking the hammer, accepting the offer of the bidder, the offeror. Auctions are assumed to be with reserve unless specified. Good listed in auctions with no reserve cannot be withdrawn and must be sold to the bidder with the highest bid.

In the case of preliminary negotiation, when contractors are invited to bid on a job, a positive response, having a bid submitted to the inviting party, is making an offer, and the inviting party is legally bound by the bid once accepted.

As the Fisher v. Bell 19602 case mentioned before, the Judge pointed out displaying goods in a shop or on the open shelves of a self-service or advertising goods for sale, is normally an invitation to treat.

Depends on the nature of the contract, either to be unilateral or bilateral, mode and timeliness of the acceptance of an offer differ.

In most cases, silence cannot be viewed as acceptance. However, regardless the nature of the contract, if an offeree is benefited by the offer and does not reject the offer when he/she can, provided that the offeree knows the offer is not offering for free, silence can act as acceptance. Also, if prior dealing exists, meaning the offeree has been receiving the same service for a period of time and express no intention to discontinue the service, the offer would be viewed as extended.

In the case of unilateral contract, communication between offeror and offeree is not required in order to close the deal, unless the offeror demands communication or by no means can acknowledge the performance of the offeree.

In the case of bilateral contract, the postal rule states that if the offeree replies the offeror using the same way the offeror used to make the offer, or the way authorized by the offeror, the two parties are legally bound when the acceptance is sent or mailed. However if the offeror states the time of receipt in the terms of an offer, postal rule does not apply. Notice that even if the offeree replies the offeror in a way not authorized by the offeror, the acceptance would still be considered as legally effective when it is timely sent and timely received.

A breach of contract gives a right to sue against another party for damages. Amount of loss can be claimed merely because the contract has been breached. However, damage cost could be claimed only specific loss which is related to the breach of contract.

Damage caused by unexpected factors such as accidents. For example, a shipowner was not liable to a charterer when, as a result of delay, the ship ran into a typhoon, accidents could be happen anywhere (The Monarch SS Co Case (1949} AC 196.

There are two rules limiting the losses for claiming damaged which could be claimed. (Hadley v Baxendale (1854, HL))

The first rule is damages have done which provide with reasonable and fair reasons would be considered to be claimed by the breach of the contract. The second is damages which may be caused or related to the contract supposed to have been in the contemplation of the parties, as liable to result a breach of the contract.

The court will review and restate the principles governing to measure the damages.(Victoria Laundry v Newman Industries (1949))3 Furthermore, the principles relating to remoteness of damage were considered in the House of Lords and gives a more clear definition ( the heron II (1969))

Amount of damages could be claimed in economical way such as money because the court will consider injured parties in an economic way to define their total loss which a contract had been legally performed. According to the two rules mentioned before, damage and remoteness damage can be claimed for such as loss of business or profit. Damages which become payable to a third party and the cost of putting right defects caused by the breach of contract.

Another common law remedy is mitigation of loss. It is the responsible to mitigate his/her loss, by not letting the amount of damage done to increase. Three rules will be applied in it. The first is the plaintiff cannot recover for loss which they could avoid but not taking proper steps to prevent the situation. The second is the plaintiff cannot recover for loss his/her has avoided, even with more work done or amount of steps to be taken in recovering the loss by applying the first rule. The third is the plaintiff may recover the loss in taking actions to mitigate his/her loss, even he/her fail to recover the loss or damage.

The plaintiff must minimize the loss resulting from the breach of contract by the other party. He/she will not be able to recover if he/she cannot do so for that extra loss. (Payzu v Saunders (1919)5

The plaintiff is not responsible for recovering loss that may have risk or dangerous act in order to mitigate the loss, it must be taken into account. (British Westinghouse v Underground Electric Railway of London (1912))

Injured feelings of recovery will be excluded in claiming of loss. But if a contract is about providing enjoyment or relaxation of service it is possible to claim for damages for disappointments and hurt feelings caused by the breach of a contract.

In Jarbis v Swan Tours (1973) 7, the plaintiff sued Swan Tour for damages because of the hotels and coaches fell short then regular schedules that the tour promised. Due to the disappointment and vexation the plaintiff is able to recover his loss. However there is a limit of recovery of damages in the breach of contract in these kinds of situations. Plaintiffs cannot claim for high amount of damage loss.

This report indicates important information for us to consider about the offer from ‘Build ‘n’ Go’ whether we should take the offer and sign the contract. To avoid any breach of contract would have done we must negotiate with the terms inside the contract to make sure we will not have any law problems to cause damage or loss.