Commercial Law For Mutual Obligations: Elements Of A Valid Contract And Sale Of Goods Act

Essential Elements of a Valid Contract

Discuss about the Commercial Law for Mutual Obligations.

1. Contract is defined as an agreement which is legally enforceable between two or more people that create mutual obligations. Thus, for any agreement to become a contract, it needs to enforceable under law. However, there are certain elements which are necessary to be present in every agreement to make it lawful. These elements are offer, acceptance, consideration, mutual consent, legal object and competence of parties (Schwenzer, Hachem & Kee, 2012).

The initial step in creating a valid contract is offer by one party and acceptance by another. An offer is defines as willingness of an individual to create contractual relationship under certain terms and conditions with intention of binding the other party as soon as the offer is accepted by the party to whom it’s made. Thus, an offer is a statement of conditions made by an offeror with the intention to bind himself. Moreover, as soon as an offer is accepted, a valid agreement is created. Thus, an acceptance is defined by an indication or expression by the offeror about his willingness to be bound unconditionally according to the terms stated in the offer (Rose, 2013). Thus, when an offer made by one party is accepted by another, a valid agreement is created; this agreement becomes a valid contract when the other elements are present in it.

Thus, the second most essential element to form a valid contract is consideration. Thus, to form a valid contract, every agreement needs to be supported with valid consideration. The definition of consideration is something in return and is usually something of value which is exchanged in return of a performance or a promise by one party to another (Amin, 2013). However, it is important that a consideration should be something of value which can be measured objectively. Thus, a promise to love or marry is not a valid consideration which can be enforceable under law.

The next essential element for a valid contract is mutual consent between parties. Thus, under the contract law in Singapore, there needs to consensus ad idem which is meeting of minds between both the parties which intend to enter into a construal relationship. The Thus, the party that initiates an offer and the party which accepts the offer for a valid consideration should understand the terms and conditions of a contract in the same manner. Moreover, the object for which the contract is created by two parties must be legal and legitimate (Beale, 2012). Thus, any agreement which is created for a fraudulent, immoral, criminal or opposed to public policy is not enforceable under law. Thus, a contract to smuggle drugs or arms is considered void as the object of the contract is illegal.

Offer and Acceptance

Lastly, to form a valid contract, the parties which are contraction need to be competent. Under the Singapore contract law, the parties entering into a contract require to be above 18 years, of sound mind and not disqualified under law to contract.

Thus, Ben proposed an offer to Alan for buying alcoholic drinks, however Alan did not accept the said offer and insisted only on purchasing Russian made alcohol. Thus, Alan decided to not accept to buy alcohol drinks from Ben’s shop and the offer made by Ben of selling vodka unless he ensures that the vodka is made in Russia. However, when Ben stated that the said bottle of vodka is distilled in Russia, Alan decided to purchase it which stated that he accepted the offer made by Ben of selling vodka creating an agreement. The other elements like consideration and both Ben and Alan being competent parties contracting for a legal object completed the agreement making it a valid contract. Thus, in the present case, when Allan purchased bottles of vodka from Ben, a valid contract was created which had all the essentials elements of contract which are offer, acceptance, consideration, competent parties, legal object and mutual consent.

2. The sale and purchase of goods whereby a seller agrees to sell or transfer the rights of certain goods to a potential buyer for some value or price.  This transaction is governed by the rules and regulations made under the Sale of Goods Act. The contract of sale of goods under the Sales of Goods Act involves making rules and regulations for both the sale and the contract for sale. The term “goods” is defines under Part 1(h) of the Sales off Goods Act including all types of movable property except money and claims (Yeo, 2012). The word goods under the Sales of Goods Act includes growing crops, shares, stocks, timber, etc. The rules and regulations under the Sales of Goods Act set out many warranties which protect both the seller and the buyer whenever needed. The rules and the regulations under the Sales of Goods Act protect the interest of both seller and the buyer. Part 1 of the Sales of Goods Act in Singapore has many implied warranties which protect the interest of the buyer from fraudulent practices of a seller. Thus, the section 15 of Part 1 of the Sales of Goods Act creates implied warranty on sale of goods by description. Thus, the said section states that when a contract of sale is created by description, there is an implied condition that the goods require to satisfy the said description. Moreover, when a sale of goods is initiated with the help of a sample, an implied condition under Sale of Goods Act states that the said goods delivered should satisfy to the sample shown at the time of selling the goods (Brudner, 2013). 

Consideration

Additionally, section 16 of the Sales of Goods Act, the act makes no specified implied warranty as to the fitness and quality of the goods sold unless the buyer express in any form to the seller the exact reason or purpose for his purchase of a said good which indicates that the buyer relies on the judgment of the seller to provide him goods relating to his description, in this case an implies condition is created which requires the goods to satisfy the requirements as mentioned in the description. The section 53 of Part 5 of the Sales of Goods Act in Singapore sets out the rules and regulation for breach of warranties by a seller (Mullender, 2013). Thus, under the said section a buyer is entitled to bring about a legal action against the seller who breaches implied warranties under the said Act. Additionally, the buyer is also entitled to set beach of warranty against the seller by reducing or voiding the purchase price.

Thus, in the present case, Allan was the buyer and Ben was the seller. Allan was very clear about his requirement of Russian vodka when he entered the liquor shop owned by Ben. Ben ensured Allan that the liquor he was holding was distilled in Russia and it satisfied his requirement. Relying on the statement made by Ben, Allan purchased three bottles of the same however; he along with three of his friend’s suffered from diarrhea post the consumption of the vodka. Thus, in the said case, Ben violated section 15 and 16 of the Sales of Goods Act by selling illicit drinks to Allan under the description of Russian distilled vodka; therefore Allan can bring about legal action against Ben (Bouckaert & De Geest, 2013).

3. The primary manner in which a contractual party tries to avoid, limit or cancel its liability arising out of contract is by including an exclusion clause within it. Exclusion clause is describes as a provision under an agreement or a contract which restricts, limits or totally avoids the liability of a party under the said contract on occurrence of specified events, situations or circumstances. Thus, the presence of an exclusion clause protects either one party of a contract from limiting its liability in case of occurrence of specified events. However, the law of every nation makes certain type of exclusion clause or exclusion clauses which entirely avoid the liability of a party from his contractual duties is considered void and illegal in the interest of public policy (McKendrick, 2014). Thus, in Singapore, the Unfair Contract Terms Act helps in regulating the contracts in Singapore by limiting the operation legality of certain terms of thee contract. Thus, the primary objective of the said Act was to limit and restrict the applicability of disclaimers in a contract. The Unfair Contract Terms Act covers all types of contracts in Singapore and also extends to cover notices which created contractual relationship between parties. Thus, the section 3 of the Unfair Contract Terms Act in Singapore talks about liability arising from a contract. The said section applies when one of the contracting parties is a consumer or relies on the written contract term which usually used in a business contract of a party. Thus, under the section 3 of the Unfair Contract Terms Act in Singapore a party cannot by including of a clause in a contract exclude or limit his liability with respect to any breach of the contractual duties arising in the contract or limit or exclude performance in respect to the whole or part of the contract. Additionally, the party contracting is also excluded from including any disclaimer which allows performance of a contract to be conducted differently from the manner which is reasonably expected (Anson et al., 2010). The term reasonable is clearly defined under the Unfair Contract Terms Act in Singapore and states that term which is fair to be a part of a contract with regards to situations which were known to parties at the time the contract was created is considered reasonable. Additionally, section 5 of the Unfair Contract Terms Act in Singapore sates that when goods are sold for personal consumption, any liability arising from loss or damage incurred due to defective goods or negligence of manufacturer or distributor cannot be limited or restricted by an exclusion clause.

Thus, in the said case, receipt given by Ben to Allan for the Russian Vodka purchased by Allan is not a contract in itself but it’s just an acknowledgment of existence of a contract. The statement printed on the receipt when was handed to Allan was not enforceable as it restricted the liability of Ben from action arising out of defective goods or negligence (Furmston & Tolhurst, 2010). In Olley v Marlborough Court Ltd, Mrs Olley lost her hotel keys even after she kept it safe at the reception. The Hotel had a disclaimer or exclusion clause stating “The proprietors will not hold themselves responsible for articles lost or stolen, unless handed to the manageress for safe custody.” However, the Court held that it was the hotel’s fault as they acted negligently and the disclaimer was not part of the contract thus the hotel could not rely on it.

Mutual Consent

Similarly, in the said case, the receipt provided by Ben was not a part of the contract and Ben could not rely on it for appropriate relief.

4. In the said case, Ben was the owner of a liquor shop which Allan visited with the intention to buy Russian vodka. Ben ensured Allan that the bottle he was holding is Russian distilled vodka. However, on consumption Allan and three of his friends suffered from severe diarrhea and found out that the vodka purchased was an illicit drink. Thus, there was a valid contract of sale between Allan and Ben which contained all the essential elements of contract within it like offer, acceptance, consideration, free consent (Poole, 2012). However, Ben had no contractual relationship with Allan’s friend as there was no offer and acceptance or exchange of consideration. Thus, Allan’s friends cannot pursue liability against Ben under contract law. However, Allan’s friends are entitled to bring a suit against Ben under the tort law of Negligence. Negligence under law is referred as failure to exercise reasonable amount of care which is expected from a prudent and reasonable individual. To establish negligence under law, certain elements require to be proved which duty, breach of duty, proximate cause are, cause in fact and damages. The primary requirement to establish negligence is to show that the defendant owed a duty of care towards the plaintiff (Branch, 2012). Thus, the relationship between the plaintiff and the defendant gives rise to such a duty. The second element to be establishes is to show that the defendant has initiated some action or conduct which breaches the duty he towards towards the plaintiff. Thus, a defendant usually fails to exercise reasonable care resulting in breach of duty. Additionally, it is important for the plaintiff in every negligence case to prove that he has suffered an actually injury or loss resulting from defendant’s failure to exercise care. Additionally, plaintiff needs to establish a legal harm which can be physical injury or damage to his property for which he can claim damages from the defendant Furmston, Cheshire & Fifoot, 2012).

Thus, every distributor owes duty of care to consumers at large for the goods that he sells under the Sale of Goods Act which creates many implied warranties as to the quality of the goods sold in Singapore. Thus, in the said case, Ben owed duty of care towards Allan’s friends who suffered physical suffering consumption the vodka he sold. Thus, Allan’s friends can rightfully bring about action against Ben for supplying goods of unaccepted quality under the tort law of negligence as they suffered physical hardship by consumption of goods sold by Ben (Bridge, 2012).

Additionally, under section 2 of the Unfair Contract Terms Act, it is clearly stated that an individual cannot by reference to any contract term liability or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence. Thus, in the said case Alan’s friends can sue Ben under tort law of negligence and Ben will not be able to rely on the disclaimer or the exclusion clause printed by them in his receipt.

Reference List

Amin, N. (2013). Protecting consumers against unfair contract terms in Malaysia: the Consumer Protection (Amendment) Act 2010. Malayan Law Journal, 1, 1-11.

Anson, W. R., Beatson, J., Burrows, A. S., & Cartwright, J. (2010). Anson’s law of contract. Oxford University Press.

Beale, H. G. (2012). Mistake and non-disclosure of fact: models for English contract law. Oxford University Press.

Bouckaert, B., & De Geest, G. (Eds.). (2013). Bibliography of law and economics. Springer Science & Business Media.

Branch, A. (2012). Elements of port operation and management. Springer Science & Business Media.

Bridge, M. G. (2012). Benjamin’s sale of goods. Sweet & Maxwell.

Brudner, A. (2013). The unity of the common law. OUP Oxford.

Furmston, M. P., Cheshire, G. C., & Fifoot, C. H. S. (2012). Cheshire, Fifoot and Furmston’s law of contract. Oxford university press.

Furmston, M., & Tolhurst, G. J. (2010). Contract formation: Law and practice. Oxford University Press, USA.

Hunter, H. (2015). Modern Law of Contracts.

McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).

Mullender, R. (2013). English Negligence Law as a Human Practice. Law & Literature.

Poole, J. (2012). Casebook on contract law. Oxford University Press.

Rose, F. D. (Ed.). (2013). Contract, Tort & Restitution. Oxford University Press.

Schwenzer, I., Hachem, P., & Kee, C. (2012). Global sales and contract law. Oxford University Press.

Yeo, T. M. (2012). The Future of Promissory Estoppel in Singapore Law.