Law Cases Essay

Our whole economy is based on the freedom of individuals to contract and a system of laws that enforces contracts freely entered into. But a lot of people may not be aware of what are the essential elements required to make an enforceable contract . Recently I was asked if a contract not in writing is binding . We are so accustomed to seeing contracts in writing that many people assume that a contract must be in writing (and lengthy) before it is enforceable . To form a contract , there are no particular words that must be used by the parties . However , there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made . Without both an offer and an acceptance , there can be no consensus ad idem or a meeting of the minds which is essential to form a contract. No conditions can be attached to the acceptance and the terms of the offer cannot be changed. If conditions are attached or terms are changed, the parties are merely negotiating and may u ltimately reach agreement on the terms of the contract. For example, if your response is that you will pay me $5.00 to cut the lawn but I must cut again next month for the same price, there is no contract. You have made a counter offer which I am free to accept or reject. Likewise, the acceptance cannot be conditional on some other events. In the same way the Lady Gaga has cancelled her concert at the O2 . Harry a local entrepreneur has got 500 T-shirts and he has asked Mike Baldwin a local shirt maker , if it is possible than is he able to print Lady Gaga on the front of the T-shirt . Mike agrees to do it but when Harry went there for collection he saw that the word print on all the T-shirt was Lad Gaga and even the ink of the print damage the material of the T-shirt which is not good . When Harry makes complain about it, Mike told him to refer the contract which is placed on the front door that limiting liability for damaged items to 20% of the value .According to this generally a clause will incorporated if the party has given reasonable notice . These was clearly illustrated in Thompson v LMS Railway . Here the claimant was injured whilst stepping off a train . The railway company displayed prominent notices on the platforms excluding liability personal injury and damage to property due to negligence . The tickets also stated they were subject to terms and conditions displayed on the platform . The claimant was illiterate and could not read the signs. She argued that the exclusion clause was not incorporated into the contract as the railway company had not brought the clause to her attention at the time the contract was made. The clause was incorporated . There is only a requirement to take reasonable steps to bring the clause to the attention of a reasonable person. There was no duty to ensure that every traveller was aware of the clause . The claimant was therefore unsuccessful in her claim for damages. (accessed on e-lawresouces .co.uk , 5/12/12 ) Clearly this objective test will very according to the facts of eagh case but there are a number of factors that are relevant in determining reasonableness in this context , one more thing is required and that is degree of notice . Harry had a small notice at the front door which is limitation clause and it is stated therefor that less onerous than exclusion clause . It may be common notice of trade because the actual size of the notice may be more significant .This has been proved by stating some more case laws such as , Thornton v Shoe Lane Parking , The claimant was injured in a car park partly due to the defendant’s negligence . The claimant was given a ticket on entering the car park after putting money into a machine . The ticket stated the contract of parking was subject to terms and conditions which were displayed on the inside of the car park . One of the terms excluded liability for personal injuries arising through negligence. The question for the court was whether the term was incorporated into the contract ie had the defendant brought it to the attention of the claimant before or at the time the contract was made . This question depended upon where the offer and acceptance took place in relation to the machine . The machine itself constituted the offer . The acceptance was by putting the money into the machine. The ticket was dispensed after the acceptance took place and therefore the clause was not incorporated into the contract. According to previous decision of Spurling v Bradshaw , it is stated that some clauses are to be printed in red ink and with the red hand arrow pointed towards the notice, which could be held in a sufficient way . This reason was further been supported by Court of Appeal . Another relevant factor for the Harry’s present question of reasonableness that is the timing of the notice to be handed . The most effective time for handing the notice is before the contract has been made otherwise it is too late . This has been made abundantly clear in cases such as Olley v Marlborough Court Hotel and Thornton v Shoe Lane Parking . That’s the reason that if Harry had contracted in advance of arriving at the counter , the notice would be too late . However if he arrived to complete the agreement then the clause could be part of the contract . These states that even if the limitation clause is incorporated into the contract than it does not mean that it is an effective clause . The law has sought to protect vulnerable parties from exemption clauses . This protection has take two forms :- Judicial control through the common law and statutory control since 1977 . The judicial approach is known as the contra proferentum rule. According to this , if there is any ambiguity in the wording than that is strictly constructed against the party which seeking to rely on it . Limitation clause are construed in a more liberal manner as they are not as harsh as exclusion clauses .In Ailsa Craig Fishing v Melvern Lord Fraser reffered to this strict principle when they applied , A contract between existed between Securicor and Aberdeen Fishing Vessel Owners Association whereby Securicor were to provide security cover in the harbour where the claimant’s vessels were moored . As a result of negligence and breach of contract the claimant’s vessels sunk. The contract contained a clause which provided that in the event of negligence or breach , Securicor would not be liable for any amount exceeding  £1,000 in any one claim and that it would not be liable for more than  £10,000 in any twelve month period . The House of Lords held that where the clause limits liability rather than excludes liability altogether the courts should apply the natural meaning of the clause and not be too eager to find ambiguity . So the court would be more lenient in their interpretation of Harry’s clause since it limits liability . If Harry’s clause is clear and unambiguous there would be no scope for application of the judicial control system . As in certain circumstances the clause can even cover a fundamental breach as in Photo Productions v Securicor . According to the Unfair Contract Terms Act 1977, the clause of Harry must be satisfactory . (accessed on Ailsa Craig fishing v Malvern Fishing (1983) . Here the Act clearly applies the Harry’s clause where a business seeks to exclude or limit liability . Under section 2(2) clauses attempting to exclude or limit liability for damaged property caused by negligence are subject to a test of reasonableness . The test is in section 11(1) and basically states that a clause is reasonable if in all surrounding circumstances of the case , than it is reasonable .This circular definition gives the trial judge a discretion to decide each case on it s own facts . under section 11(5) the burden of proving that the clause is reasonable is on the party seeking to rely on it .So Harry must prove that the clause is reasonable . Section 11(4 ) states two factors that the court must consider when determining the reasonableness of a limitation clause . Firstly the resource of party rely on the clause and also the question of whether he is in a position to insure against the risk of loss . Harry’s has the resource of profit making business as opposed to the resources of the community theatre and would also be able to insure against the risk of such losses . After determining the reasonableness of the clause which attempts to exempt liability implied in contracts for the sales of goods , this kind of act must be consider in court. However the courts such as House of Lords states certain factors in two different case laws , they are such as Smith v Bush down to the county court in Woodman v Photo Trade Processing . These two case law states that some of the factors of Schedule 2 are considered as case of negligence. According to the case law of Smith v Bush , it states that a survey report of the claimant’s house carried out by the defendant failed to advise on some structural damage to the property which resulted in the chimney breast collapsing. There was no contractual relationship between the claimant and defendant as the mortgage company arranged the survey and the claimant made payment to the mortgage company . The contract between the claimant and the mortgage company contained a clause exempting the surveyor from liability . In considering if such a clause was reasonable under the Unfair Contract Terms Act 1977 , the court took into account the fact that it was a modest house to be used as the family home and concluded that it was an unreasonable clause and therefore ineffective. The House of Lords held that it might be reasonable for a surveyor to exclude liability if the property was of higher value or to be used for investment or business purposes . According to this case law , they are generally relevant to question of reasonableness , here on of the factor is related to the bargaining strengths of the parties . (accessed on Smith v Eric Bush (1990) , 5/12/12) . In the case law of Woodman v Photo Trade Processing , Woodman sent wedding photographs to PTP for processing . The film was sent in an envelope which contained , printed on the outside , an exemption clause limiting liability to a replacement film . The film was lost due to negligence (it would now be considered as failure to exercise reasonable skill and care under s13 of the Supply of Goods and Services Act 1982). W sued. The court decided that this limitation on liability was (in these circumstances) unreasonable, since it was due to negligence that the film was lost , and the consumer had no choice over the contract. Since this decision , most postal film companies offer a choice of paying extra for insurance . Even with this option , there have been cases where these companies have been held to be acting unreasonably , because the clause has tended to be hidden , in small print on the envelope. (accessed on economic truth .co.uk , 5/12/12 ) . According to these two case laws, it is relevant that Harry and Mike are two businesses and would appear to have equality of bargaining strengths. This strength can be used as an opposition for both the customer and a business or even for any small business or multinational. Another relevant factor would be whether Mike’s knew or ought to known of the clause, perhaps from the trade . The trial judge suggested that the clause would be more reasonable if the customer had a choice from a two tier service, one will low costs but a high risk , and one with more protection but at a premium . The basic idea from this is logical , and if Harry does in fact offer such a two tier service it would go in his favour . In Phillips v Hyland Slade LJ , it demonstrates the action of the [Unfair contract terms act (1977)] . The plaintiff hire an excavator and driver from the defendant ; the driver negligently drove the excavator into the plaintiff’s building , causing damage . When sued for damages , the defendant relied on an exclusion clause that disclaimed liability for negligent actions of drivers . The plaintiff argued that the exclusion clause was inadmissible under the UCTA , which states that a clause disclaiming liability for damage resulting from negligence must be shown to be reasonable . The defendants tried to argue that the clause at issue was a duty-defining clause , and not an exclusion clause at all . The court , acting in the spirit of the UCTA , deemed that the clause was defensive , not duty-defining , and therefore an exclusion clause under the Act . The defendant also claimed that the clause was reasonable , and could therefore be upheld even if it were construed as an exclusion clause . The court held that the plaintiff , which hired excavators only rarely , was not in a position to estimate the risk involved in doing so ; the defendants , however , were operating in their main line of business , and should have been able to assess the risk accurately and take insurance to cover it . The clause was therefore deemed unfair and struck out .(accessed on lawiki.org/index.php , 5/12/12) . This application of the test of reasonableness turns on the facts of each case and will not be treated as binding precedent . So if the cause if similar to Harry’s than he had satisfaction of previous test of reasonableness , that is not to be taken as an indication of the validity of Harry’s clause . At the last it is clearly stated that this case is also turns on its own facts . REFERENCE :- * Ailsa Craig fishing v Malvern fishing (1983) , http://www.e-lawresources.co.uk/cases/Ailsa-Craig-fishing-v-Malvern-fishing.php , 5/12/12 . * Image of leadership and management , http://www.transitions coaching service.co.uk/page/1lko/about_us_ , 5/12/12. * Philips v Hyland Slade LJ (1987) , http://lawiki.org/index .php?title= Philips_ products_v_hyland_(1987)&action=edit ,5/12/12 . * Smith v Eric Bush (1990) 1 AC 831 , http://www.e-lawresources.co.uk/Smith-v-Eric-Bush.php ,5/12/12 . * Thompson v London ,Midland and Scotland Railway co , http://www.e-lawresources.co.uk/Thompson-v-London-Midland-and-Scotland-Railway-co.php , 5/12/12) . * Woodman v Photo Trade Processing 1981 , http://www.economic-truth.co.uk/?page_id=148 ,5/12/12 .