You are a solicitor working for a firm which provides a series of seminars for clients wanting to set up a business for the first time. Your task is to produce a written report, to be given to each client attending the seminar, setting out in “user friendly” style the principles of law relating to the formation of a valid contract and their application in business situations.
You have decided to produce the information as a set of questions and answers with an analysis of 2 case studies to illustrate the legal principles.
1. What is a contract?
2. What are the essential elements for the contract to be legally binding? Briefly describe each of the elements.
3. Explain the importance of the following essential elements:
(a) offer and acceptance
(b) an intention to create legal relations
(c) consideration and privity of contract
(d) legal capacity
4. Explain the significant differences between the following types of contracts and discuss the impact on the parties of those differences:
(i) Contracts made face to face,
(ii) Contracts in writing, and
(iii) Contracts for distance selling.
5. Case Studies –
Case Study 1:
Is there a valid contract in the following situations? Give reasons for your answers.
(1) Fatma writes to Majid offering to buy his boat for AED15,000 and says that if she has not heard from Majid within 1 week then she will assume that he has accepted. A week has passed and Fatma has not heard from Majid.
(2) Peter sees a laptop in a shop window with a price tag of AED 2500. He says he will buy the laptop but the shop assistant says that the price tag should read AED3500 and refuses to sell it to him for the lower price.
(3 Marwan offers to sell his horse to Bilal for AED4000. Bilal says he would buy the horse for AED3000. Marwan refuses to sell at that price. Bilal then says he will pay AED4000.
(4 On Tuesday, Ahmed writes to Maitha offering to sell her a painting. He says he will keep the offer open until 3pm on Thursday. On Wednesday, Ahmed changes his mind and sends a fax to Maitha at 11am revoking the offer. Maitha’s fax machine had run out of paper and she does not receive the fax until Thursday morning. On Wednesday, Maryam had posted her acceptance of the offer at 12pm.
(5 Bill sent out a circular to all businesses in the area offering to sell his fleet of company cars and asks for tenders to be submitted. Eissa’s tender is the highest but Bill refuses to sell him the cars.
Case Study 2:
What is the legal obligation (if any) in the following situations? Give reasons for your answers.
(a) Each month, Jim, Mary and their grandson, Mark, enter a word puzzle competition, each paying AED10 towards the entry fee. Mark always emails the entry form, pays the entry fee and receives the confirmation of entry. Last month, they won the competition and the prize was AED 3000. Mark refuses to share the AED 3000. Advise Jim and Mary.
(b) Ramy called the police when he discovered a robber had stolen his car. When they arrived, he told Saif, the officer in charge, that he would give each of the 3 police officers AED400 if they returned the car to him by 9am the next day when he was due to go on a driving holiday. The police officers recovered the car and returned it to Ramy by 8am the next day. Ramy has refused to make the payment to the police officers. Advise the police.
(c) Amal is driving to Sharjah when her car tyre gets a puncture. The driver of an unmarked van stops and offers to change the wheel of her car. When he has changed the wheel he says, ‘That will be AED250. I’m part of the Roadside Breakdown Service. My garage is nearby.’ Is Amal obliged to pay the AED250?
(d) While Joan is away on holiday her neighbor, David, mows her lawn at the front of her house. When Joan returns she is so pleased that she promises to give David AED150. That happened two weeks ago and John has not yet received the money. Is there a contract between Joan and David?
TASK 2: Outcomes: 1.3, 2.2, and 2.3
To achieve a PASS Grade, you should be able to do the following:
You have been asked to contribute to an information booklet titled ’Terms in a Contract and Exclusion of Liability’ Clauses’.
You have been asked to produce a written report (1500words )explaining the following terms and using the 2 case studies to identify and explain the legal issues they raise.
1. (i)Explain the meaning and significance of the following contractual terms a) to e).
a) Express term
b) Implied term
e) Innominate term
(ii) What is the impact if the terms c), d) and e) are broken? Use examples and legal cases to support your arguments.
2. Case studies 1 and 2.
Explain the legal principles raised by the case studies and advise the parties as to their legal options. Refer to decided legal cases to support your arguments,
Case Study 1
1. Sea Traders Ltd has agreed to charter a ship from Ships For Hire Ltd and the parties have included a clause in the contract for the charter of the ship which states:
‘It is a condition of this contract that the ship is seaworthy in all respects.’
This was included because Sea Traders Ltd wants to make sure that the goods to be carried in the ship reach their customers on time or it will face penalties and may lose further business.
The contract is for 18 months. At the beginning of the charter, there are problems with its maintenance as the crew supplied by Ships For Hire Ltd is inexperienced and the chief engineer is not competent. Partly due to this, the ship has engine troubles and is unable to go to sea for 3 months during the first 8 months of the charter. Sea Traders Ltd no longer wants to charter the ship and wants to end the contract and claim damages from Ships For Hire Ltd.
Advise Sea Traders Ltd as to its legal options.
2. Case Study 2
(1) What is an exclusion clause?
(2) In each of the 2 following situations, have the exclusion clauses been incorporated
into the contract? Give reasons using cases, if possible.
(i) Mohammed buys a ticket to a concert. On the back of the ticket, there is a clause excluding liability for any loss or damage to the property of the concert goer, howsoever caused.
(ii) Ayesha arrives at a hotel, checks in and goes to her room. There is a notice on the wall saying that the hotel will not be liable for any loss of valuable items, if the safety box in the room is not used. Ayesha has been to the hotel 3 times in the last 6 months.
(3) How would a judge interpret the meaning of an exclusion clause included in a
contract with a warehouse which states: ‘ the warehouse shall not be liable for
items stored here which are damaged by flooding, howsoever caused’ ?
(4) Fred grows prize-winning orchids as a hobby. He always buys orchid fertilizer from
the company, ‘Beautiful Gardens Ltd’. After the last purchase, within 2 days of using
the fertilizer, the orchids die. On the back of the sale document, it states, ‘The
liability of Beautiful Gardens Ltd for defective products will be limited to the price
for the product’. The value of the orchids (if still alive) is much greater than the
cost of the fertilizer.
What is the effect of the notice on the back of the sale document?
Will Fred be successful in a claim against Garden Supplies Ltd? Give reasons.
What remedy could he seek?
Refer to: The Consumer Rights Act 2015
Task 3: Outcomes: 3.1, 3.2, 3.3, 4.1, 4.2
3.1 Contrast liability in tort with contractual liability
3.2 Explain the nature of liability in negligence
3.3 Explain how a business can be vicariously liable
4.1 Apply the elements of the tort of negligence and defences in different business situations
4.2 Apply the elements of vicarious liability in given business situations