Business Law For Legal Relationship And Legal Capacity

Elements of Valid Contract

Discuss about the Business Law for Legal Relationship and Legal Capacity.

The elements of valid contract need to be discussed in order to make it clear whether there existed a valid contract between Ben and Alan. The main elements of  contract that is valid are offer, acceptance, consideration, intention to form a legal relationship and legal capacity.

Elements of Valid Contract

There are five essential elements that are there to contract that are required to be complied with for a valid contract:

The first step of forming a contract that is valid is an offer; this defines the willingness of a person to contract in line with terms that have been specified. Further the intentions of these terms are to make the offer’s terms binding as soon as the same are accepted by the parties. An offer has two parties (i) the one who makes the offer, offeror and (ii) the one to whom the offer has been made

There are three requirements that need to be fulfilled for an offer (i) exchange terms should be there, (b) willingness should be there of the offeror to make the contract binding, and (c) once there is acceptance of the offer there is power that has been given to the offeree to make the offeror bind to the same and the offeree cannot retract the offer.

Acceptance is when all the conditions and terms of a contract have been accepted unconditionally. It is necessary to communicate the acceptance of the offer to the offeree to make it effective. It can be an oral and a written communication. There should not be any kind of undue influence or duress otherwise; the contract may not be recognized legally(Balfour v Balfour, 1919).

It is necessary the for an enforceable promise there needs to be a consideration attached to it. This consideration is something which in the eye of law has some value attached to it.

Legal intention needs to be there for creating a relationship that is binding legally. This under the law is determined on the basis of facts of each case. In Social and Domestic Agreements, there is the presumption of law that intention did not exist for the creation of the relationship that was binding legally (Balfour Case).

The Final element is that of legal capacity which means people who are minors (in Singapore with effect from March 2009 the age of a minor is 18 years) or mental incapacity.

Facts of Case

Alan an avid drinker who loved to try out exotic and Ben sells alcohol; he made an offer to sell vodka that was Russian distilled (according to him) to Alan.

Issue

Is there a valid contract between Ben and Alan?

Application of Law

In this contract of sale an offer has been made by Ben for selling the alcohol to Alan and the same has been accepted to Ben. There was no undue influence or duress on the part of either of the parties. There was consideration paid to Alan in return of a the Vodka for which a payment receipt as a proof of such payment was given to Alan. There exists an intention to create a relationship that is legal because this is a contract of sale which is commercial in nature. This contract of sale forms a relationship of seller and buyer which make it recognized legally. Further, as it is alcohol which is being sold and bought, the presumption can be made that neither of the parties are legally incapacitated to make such contract.

Conclusion

There exists a valid contract between Ben and Allan since the elements of contract have been satisfied.

When a product is being sold it needs to comply with the provisions of Sale of Goods Act. Since in this given situation there is alcohol which is being the SGA would be need to be complied with.

Rule of Law

The section 14(2A) of the Sale of Goods Act (“SGA”) states that the satisfactory quality is required to be met by the goods which is the standard which any person who is reasonable would regard as satisfactory, taking into account the goods description, the relevant price and any other circumstances that are relevant(“Ch.09 Domestic Sale of Goods”, 2016). This type of inquiry is (a) objective in nature since it is from a reasonable person’s point of view placed in the position of the buyer who has background and knowledge, and (ii) considering all or any factor at every step that may be relevant to the given person(Compact Metal Industries Ltd v PPG Industries (Singapore) Ltd, 2006)(National Foods Ltd v Pars Ram Brothers (Pte) Ltd, 2007).

The section 14 (2B) qualities of goods include various conditions and their state, and its safety is one of the aspects that need to be considered for the quality to be satisfactory(Nair, 1984).

In the case wherein the buyer requires the good to possess qualities that are special and the same was made known to the seller the standards under 14(3) would be higher then those placed under section 14(2). In this case the seller would be liable if the goods are not suited to the purpose that is special even if the general quality is satisfied(National Foods Ltd v Pars Ram Brothers (Pte) Ltd, 2007).

Application of Law

Facts of the Case

Alan had informed Ben that he needed Russian Vodka to which Ben confirmed to Alan that the Alcohol provided by him was Russian Distilled Vodka.

Issue

Whether any statutory provisions are being contravened by Ben under the Sale of Goods Act?

Application of Law

Ben has contravened the Sale of Goods Act section 14 (2A) under which no reasonable person would in the place of Alan consider the goods to be of safe quality since Alan had clearly asked for Russian Distilled Vodka and Ben had sold him bootleg alcohol saying that it was Russian Distilled. Further section 14(2B) is of SGA is also violated since the goods supplied are not safe. Also, there was a higher implication that was placed on Ben under Section 14(3) since special reliance had been placed on him at the time of buying of the product.

Conclusion

There has been a clear violation of the provisions of the SFA by Ben.

Rule of Law

Ths receipt was given to Alan with the exclusion after the contract had been formed whether the same would be binding on Alan.

Applicable Law

The term receipt means when a party in writing acknowledges that they have received from a person who name has been mentioned on the receipt consideration that which the receipt has been specified in the receipt. Apart from this acknowledgment of receiving certain consideration there sometimes is also the acceptance of their being a particular agreement between the parties. However, the receipt is only contracted’s prima facie evidence that it exists between the parties.

Further with respect to incorporation of terms in an agreement, it must be noted that the main requirement for the court to consider a term as incorporated in the agreement is that the notice of the same has to be given either during the agreement to the contract or prior to it.

In the landmark case of Olley v. Marlborough Court Hotel case, it was stated that it to be considered for a term to be incorporated in a contract the notice of the same has to be given either prior or at the time when the contract is being formed (Olley v. Marlborough Court Hotel, 1949). In this case, where a hotel room was booked by the claimant which the defendant owned there was a notice in the room of the hotel that the hotel shall not be held liable for any stolen o  lost goods unless it had been specifically given to the management for safe-keeping. The coat of the claimant was stolen from the room, and she sued the hotel for the same. The court opined that since it was after the formation of the contract, which was at the reception of the hotel, that she became aware of the terms i.e. once she reached the room she could claim for damages.(Articles and conditions of building contract, 2011).

Conclusion

Further, it should be noted that it is in the document of contract that the exclusion clause must be incorporated. This document of the contract which by a person is considered to reasonably contain the terms and condition of the contract it should not be the consideration’s mere acknowledgment such as a receipt. In the case of Parker vs. SE Railway Co. Mr. Parker had left his bag in a cloak roam that was run by the South Eastern Railway Company  (Parker v. SE Railway Co., 1877). A payment of two pence was made by him and the bag deposited for this he was given a ticket. There was instruction on the front side of the ticket to read the back in which it was mentioned that the railway would not be liable for goods that were worth 10 pounds or more. Since Mr. Parker this was only a receipt he did not read this though he admitted that he was aware of the fact that there was some kind of writing on the ticket. Mr. Parker’s bag which was valued at more than 10 pounds was lost. The company was sued for the same. The question that was put forth before the court was whether the clause applied to Mr. Parker or not. The jury opined it was reasonable on Mr. Parker’s part for not reading the ticket’s conditions as considering it was only a receipt.

A receipt was issued by Alan to Ben for the purchase of Vodka that was made which stated that “Product sold are not refundable nor the seller responsible for the safety of the products”.

Issue

Whether the statement printed is valid and enforceable?

Application of Law

In the light of the discussions and case laws mentioned above it is evident that in the case of Allan and Ben the clause of exclusion that had been added in the receipt was necessary to be informed to Ben either at the time when the contract was being made or before the contract was being for it to be considered as an exclusion in the contract however since the same was informed to him after the sale of contract had completed  it would not be considered as an exclusion clause of the contract and damages can be claimed by Ben from Allan  as in the Case of Olley v. Marlborough Hills. Further, also it should be noted that as in the case of Parker v. SE Railway, since the clause was mentioned on a receipt it would be reasonable for Allan to ignore the same.

Incorporating Terms in a Contract

Conclusion

Receipt is only an evidence of contract. Further an exclusion clause would only be considered to be a part of the contract when notice of the same has been given either before or at the time of contract formation.

Alan’s friends got sick due to consumption of Alcohol provided by Ben. The cause of action is to be brought by them against them.

Rule of Law

It is first essential to establish that duty of care existed for claiming damages for negligence. If there is proximity between the defendant and the plaintiff a duty of care would be said to have existed. A reasonable test of foreseeability exists for establishing the duty of care. A duty of care shall be owed towards the plaintiff where it can be reasonably foreseen that harm may be caused due to an act or an omission to the plaintiff by the defendant (Donoghue v Stevenson, 1932).

The product liability principle was established in the case of Donoghue v. Stevenson; wherein it was stated that a duty of care existed even in the case where there was no proximity between the parties nor was there any contract (Donoghue v Stevenson, 1932).   Further, it also stated that reasonable care was required to be taken for avoiding acts or omissions that could be reasonably foreseen that could likely cause injury to the neighbor. Those that are affected directly and closely by an act are neighbors(Donoghue v Stevenson, 1932).

In the sale of goods, the duty of care is owed to the ultimate consumer even if there was no chance on inspection of the product. Thus it can be stated in the purview of the product liability principle that had been established that it was towards the ultimate consumers that the duty was owed and also towards the neighbor to ensure that no omission or act caused any harm.

Causation requires it to be necessary that negligence should be harm’s necessary condition, and that harm is falling within the defendant’s scope of liability. The issue of remoteness and causation are separately tended to, the ‘but for’ test is the key tens when it comes to causation which basically question whether there could have been sustaining of the loss ‘but for’ the negligence of the defendant.  The case of Barnett v Chelsea and Kensington HMC (1969) is a leading case in this regard(Barnett v Chelsea and Kensington, 1969). Thus in the case of Alan’s friends and the alcohol supplied by Ben if we apply the but for the principle, it can clearly be stated that had it not been for the harmful alcohol they would not have fallen sick hence the harm falls within the scope of liability of Ben.

Olley v. Marlborough Court Hotel Case

The section 2(2) of the UCTA states that the terms that are unfair will be void and the rest of the contract to the extent it is capable of operating without such term would be applicable on the parties(Holly, 2016). Privity of contract means that third party cannot be bound by a contract between two parties. However, non-contractual obligations and rights are not restricted under. Particularly liability of negligence would not be restricted under it.

Facts of the Case

After drinking the alcohol brought by Alan, Alan’s friends got really sick.

Issue

Whether Alan’s friends can sue Ben?

Application of Law

There has been a breach of duty on the part of Ben when he sold the bootleg alcohol to Alan since it could have been reasonably foreseen by him that any person who would be drinking the alcohol could be harmed.  Thus, since there has been a breach of duty on the part of Alan by selling harmful bootleg alcohol he would be held liable for it even by Alan’s friends, and there is no remoteness of relationship as, as per the product liability principle it is the ultimate towards whom the duty of care is owed. Further privity of the contract would not be applicable on Alan’s friends as there has been negligence on the part of Ben.

Conclusion

Alan’s friends can sue Ben because  there is a duty of care that exists towards the ultimate customer and there has been a breach of the same.

References

Articles and conditions of building contract. (2011). Singapore.

Balfour v Balfour, 2 KB 571 (1919).

Barnett v Chelsea and Kensington, HMC (1969).

Carlill v Carbolic Smoke Ball Company, EWCA Civ 1 (1892).

Ch.09 Domestic Sale of Goods. (2016). Singaporelaw.sg. Retrieved 4 July 2016, from https://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-9

Compact Metal Industries Ltd v PPG Industries (Singapore) Ltd, SGHC 242 (2006).

Donoghue v Stevenson, AC 562, 580. (1932).

Nair, G. (1984). A guide to consumer law & sale of goods. Singapore: Quins.

National Foods Ltd v Pars Ram Brothers (Pte) Ltd, 2 SLR(R) 1048 (2007).

Neyers, J., Bronaugh, R., & Pitel, S. (2009). Exploring contract law. Oxford: Hart Pub.

Olley v. Marlborough Court Hotel, 1 KB 532 (1949).

Parker v. SE Railway Co., 2 CPD 416 (1877).

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd., 1 Q.B. 401 (1953).

Holly, L. (2016). An overview and analysis of the National Unfair Contract Terms Provisions.Epublications.bond.edu.au. Retrieved 23 June 2016, from https://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1396&context=law_pubs