Contract is an official agreement which could be oral or written . They can be executed by using informal and formal terms . They could be either spoken or written. It is a promise which is made amongst two or more parties .
It has six significant components viz. for it to be valid . They are acceptance, offer, intention, consideration in order to create a legal relation ,capacity and certainty. If the above mentioned elements are not present in a contract , it is considered to be invalid. So, in this assignment, the essential elements of a contract would be explained in the context of the case study of the firm ABC surveyors , placing an advertisement to sell off its large stock of surplus office equipment and machinery .
The case study pertains to whether would be bidders who had read the advertisement for the initial sale on 15th February can sue ABC Surveyors for compensation for the losses incurred including travelling and hotel expenses.
A contract is aimed at creating an agreement amongst two or more parties regarding a specified subject . It is a legal binding agreement amongst two or more parties . If it consists the fundamentals of a strong legal agreement , then it is enforceable by a binding arbitration or law .
One of the major elements of a contract is offer. An offer or promise is needed in a contract as without offer, there is no contract . It is one of the major elements of the contract as it ensures that it is legally valid or acceptable.
It is crucial for the party to make an offer. For making an offer, there should be two parties which are legally capable of executing a contract . Upon the acceptance of the contract , a valid legal contract is executed (Riefa,2016) .
The second element is approval. After having an offer in the contract, there must be acceptance. In order to make a contract , there should be approval from the other party. When the other party is clear with the offer it should accept the offer , once it is clear with the conditions of the offer .
The third element is consideration which is one of the important components of the contract .Consideration in a contract implies that there would be exchange between the promisor and promisee. The consideration in a contract is legally valid.
There should be intentions to create legal relations. The contract would not be legally valid if the common intentions of the parties can be enforced legally. Other element is certainty. The terms and conditions should be specific and clear. They should be easily comprehended by the parties. Lastly, the parties which must be legal capable to execute the contract .
There is a difference between an offer and an invitation to treat . An offer is made when the person is willing for entering into a contract which is legally binding. An invitation to treat is supplying information to attract a person for making the offer.
The difference between the two can be misleading and misinterpreted . In Harvey vs Facey [1893], it was held that when the complications and misinterpretations occur , then the court decide and differentiate between the two terms. A person is not led into a contract which is binding if he is not willing to be part of but is supplying the information regarding which an offer is to be made.
With the context of the given case, an advertisement can be an offer or an invitation to treat . The intention of the parties form its basis . In the case of Partridge vs Crittenden [1968] it was held that it is based upon the purpose of the parties to consider it as an offer or invitation to treat .
In this context , it is essential to understand the relevance of unilateral contract . A unilateral contract is a contract which is made by an offer accepted only by its performance. It can be formed by expressing an offer stating that it can only be acknowledged through its execution.
Advertisements are not offers but invitation to treat so the person who are advertising the product are not bound to sell it. In some situations known as unilateral contracts , the advertisement can be an offer as stated in Carlill vs Carbolic Smoke Ball Company [1893] .
But on the contrary ,in Harris vs Nickerson [1873] , it was held that the advertisements in which the goods were put into auction does not comprise of an offer to any person . Thus the advertiser can freely remove his goods from the auction at any time before initiating the auction.
Furthermore, in the case of Harris v. Nickerson [1873], the court held that the advertisement does not comprise of an offer , rather it is mere announcement of the content. It was held that the defendant advertised in the newspapers of London about auctioning certain office furniture and equipment for three days .
The Plaintiff obtained the commission for buying the furniture and spent time and expenses for travelling to the place where the bidding would be done for the office furniture. On the third day , the lots of furniture were removed and upon this , the Plaintiff sued for loss of expenses and time(Heeney, 2012) .
Upon the appeal to the High Court , it was decided that the advertisement does not comprise to be an offer but it was a mere declaration of the content .So the claimant failed to recover the damages for the expenses of travel and travel .
So the would be bidders who had read the advertisement for the initial sale and had turned on 15th February cannot sue ABC surveyors for compensation regarding their losses for travelling and hotel expenses . As per the decisions made in the above mentioned case laws, advertisements cannot be considered as an offer rather they are mere invitation for treat or declaration of the content.
Hence to conclude, it can be said that contract is an offer which is binding upon the two or more parties executing it. But in the case of advertisements which are not offers but mere invitation to treat or declaration of the content, they are not legally binding on the parties . Hence one party cannot sue the other for its withdrawal from the contract.
In the given case, Bella who is one of the bidders asked the auctioneers if all the computers are in working condition and if they were compatible with Microsoft Windows and Office . The auctioneer without checking the computers replied that they were in good condition . Later on it was found that some of them were broken and not at all suitable for the software packages.
Same thing happened with Colin who had asked them if the photocopy machine could print in color . They were confused and incorrectly replied that it was a colored photocopier . In the given case it has been asked that if Bella and Colin can return both the computers and photocopiers as they are unhappy with them, and recover their money.
In the given case, if the statement pertains to a tenure of contract which remains unfulfilled , the party can prosecute for breaking it . But if the statement is a representation which proves to be wrong , the party can bring an action regarding the misrepresentation.
In the given case , the statements made by the auctioneer regarding computers and copier are representations as there was not contract executed amongst the parties .
It is crucial to know the difference between term or representation as it would govern the reason of remedy and action . If the statement pertaining to the term of contract is not accomplished, then the innocent party may litigate for breaking of contract . On the other hand , if it is a representation turning out to be false ,the innocent party can prosecute for the misrepresentation (Cousy, 2012).
While deciding if the statement pertains to a term or representation , the court considers the factors such as the parole evidence rule , importance of the statement , time and relative expertise of the parties.
The parole evidence rule is applied when the contract is put on writing on the terms which is comprised in the written document. These are associated with the verbal statements which can be representations (Furmston, Cheshire and Fifoot, 2012).
If the representator has vast knowledge , then it is a contractual term whereas if the representee has better knowledge then there are chances for it to be a representation. The significance of statement is associated with the fact that the representee denotes the importance of statement which is likely to be held for a term.
Lastly , timing denotes that more time lapse between making the statement and entering into a contract will make it a representation. The intention of the parties would be considered in this case. It can denoted by the fact that if the contract or representation would have been made without the statement as held in Bannerman v White [1861] .
It is clear from this case that if the representee denotes the significance to the representator regarding the importance of the statement which is likely to be held as a term .
The contemporaneousness of the statement with the contract can be explained with the help of the rule of Parol Evidence . It states that the parties had agreed to something which varies from which they finally arrived at and wrote down. It takes into account the written and oral discussions which do not make up a final written agreement.
So in the given case , firstly there was no contract amongst the parties rather it was a representation. The statements are not contemporaneous with the contract as the auctioneers had lied to the parties regarding the authenticity of the goods( Pultrone,2012) .
The oral statement was not confirmed in writing . As held in Birch v Paramount Estates [1956] it was held that the if in a written contract , no references are made to the oral statements then they are contractual terms . In this case, the defendants had special knowledge .
The auctioneer do not possess special skill and knowledge about the things which were to be sold. As held in Oscar Chess Ltd. v Williams [1957] if the representee had greater knowledge and skills and is in a better place to distinguish between the things to be sold then it is representation .
In the case of Dick Bentley Production Ltd vs Harold Smith (Motors ) Ltd. [1965] it was held that that the statement was a term since the dealer had superior knowledge and the claimant depended upon the expertise.
As compared with the case of Oscar Chess Ltd. v Williams [1957] , the defendant’s statement was not a contractual term rather it was a representation as the defendant had better expertise and the claimant relied upon the expertise( Zulhafiz, 2015) .
The auctioneer is not an expert on computers and copiers so his statements cannot be a term rather they are representations as the representees had better knowledge and skills , though they relied upon the expertise of the auctioneers regarding the authenticity of the products. Thus the statements made by the auctioneer did not become contracts rather would be mere representations( Chen-Wishart, 2012).
Misrepresentations mean untrue or misleading statements of fact which are made while one party negotiates with the other while executing the contract . The misled party revokes the contract and it may be awarded damages as well. They can make a contract voidable.For innocent misrepresentations , the court can either damages or rescissions . For actionable misrepresentations i.e. fraudulent and negligent misrepresentations , the court can award both damages and recession . Regarding innocent misrepresentations the court can award either recession and damages. It is not authorized to award both( Wilkinson-Ryan, 2012) .
Facts pertain to the statements made in the real world which are supported by convergent evidence . They can be verified and proven whereas an opinion is a statement which holds a component of belief . It cannot be true and hence not proven.
In Bisset vs Wilkinson[1927] it was held that that the defendant and plaintiff knew that the statements made by the defendant had not carried on the business of sheep farming on the land . The Privy Council held that the statements made by the owner were a statement would be considered as a statement of fact but in this case it was mere an expression of his opinion . In the absence of fraud , the purchaser did not have ant right to revoke the contract.
In Smith vs Land & House Property Corp [1884] it was held that the statement made by the plaintiff was a fact not an opinion.
In Redgrave v. Hurd [1881] it was held that the contract should revoked on the basis of innocent representation. The court held that the defendant was not under a duty to verify the papers and his reliance was enough on the misrepresentation made by the plaintiff. So the innocent misrepresentation have to induce the party for entering into a contract.
As per the given case, the auctioneer induced Bella and Colin to enter in to the contracts. There are three kinds of misrepresentations. A fraudulent misrepresentation is made intentionally without its belief into the truth .The courts can revoke the contract or the claimant can seek damages .
A negligent misrepresentation is made inaccurately or without having rational grounds to believe that it is true . The claimant can seek for revoking the contract or for damages as well.
The innocent misrepresentation is made when the representator believes that the statement is true but in reality it is not. The court may order for revoking the contract or for obtaining the damages (Decarolis,2014) .
A misrepresentation is also known as incomplete statement of a material fact. A fraudulent misrepresentation have occurred when the representation was made and it was incorrect. The defendant was aware that the representation was false and he had made the declaration without the knowledge of truth .
The fraudulent misrepresentation was made with the intent so that the plaintiff can rely upon it. Also , the plaintiff did not rely upon it and he suffered losses as a result of this . As held in Derry v. Peek [1889] the court decided that the claim of shareholders was rejected because it was not proven that the directors were dishonest . So the plaintiff could not claim against the defendant company for deceit.
As per Howard Marine and Dredging Co Ltd v. An Ogden and Sons (Excavations) Ltd [1978] , it was held that the negligent misrepresentation is made without having the grounds to believe that the statement is true as per section 2(1) of Misrepresentation Act 1967 .
The burden of proof is on the defendant. So the court decided that the there was no collateral warranty agreed amongst the parties preceding the agreement. So the court found responsible for breach of duty as per Misrepresentation Act 1967 (Gao et al.,2013).
Hence to conclude, it can be said that the auctioneer’s statement in this case is a negligent misrepresentations . The remedy available is that claimant can seek for revoking the contract or for damages as well. As held in Whittington v. Seale-Hayne [1900] it was decided that indemnity would be awarded as it allows the compensation for the consequential losses which are not due to misrepresentation . SO it did not arise a cause of action for the same.
In this part, it has been asked if Dorris can insist on purchasing Lot 20 as according to her the auctioned ahs no right to remove the items.
Reserve price is the minimal amount which the owner for the auction shall accept for the winning bid in the auction. An auction without reserve mean that the items would be sold regales the price .
The advertisement is an invitation to treat as they lack significant information which would make them an offer . However there are circumstances which would make them an offer viz. if they contain all terms . They have the capability of acceptance without any negotiation . Lastly there is a certainty regarding the terms.
As held in Warlow v. Harrison [1859] an advertisement to hold an auction without reserve is invitation to treat . It would amount to an unilateral offer so the auctioneer would be liable to pay for damages for withdrawal of goods from sale (Deep, Singh and Ahmad, 2016).
In the case of Barry v. Davies [2000] the court held that the claimant would be awarded for damages as the defendant was contractually obliged for selling the items to the claimant who was the highest bidder . It gave rise to the collateral contract with the auctioneers.
The court upheld the rights of the claimant for damages in Heathcote Ball v. Barry [2000]. When the auction occurs without reserve , the auctioneer makes a unilateral offer which is to be approved through the submission of highest bid. So a binding contract entitled the defendant for damages thereby compensating the loss of bargain.
Doris is entitled for goods because it is an invitation for treat and a unilateral offer made by the auctioneers which is to be accepted through the submission of the highest bid (McKendrick, 2014) .
Conclusion
If the auctioneer failed to allow Doris to have the goods then they would be entitled to compensate for damages . They do not have the right to remove the goods from the sale as it was a unilateral offer to be accepted by submitting highest bid.
References
Bannerman v White [1861] 10 CBNS 844
Barry v. Davies [2000] 1 WLR 1962
Bisset vs Wilkinson[1927] AC 177
Carlill vs Carbolic smoke ball company [1893] 1 QB 256
Chen-Wishart, M.( 2012) Contract law.UK: Oxford University Press. Pp.1-10.
Cousy, H.( 2012) About sanctions and the hybrid nature of modern insurance contract law. Erasmus L. Rev., 5, p.123.
Decarolis, F.(2014) Awarding price, contract performance, and bids screening: Evidence from procurement auctions. American Economic Journal: Applied Economics. 6(1), pp.108-32.
Deep, S., Singh, D. and Ahmad, S.A.( 2016) A review of contract awards to lowest bidder in Indian construction projects via case based approach. Open Journal of Business and Management, 5(01), p.159.
Derry v. Peek [1889] 14 App Cas 337
Dick Bentley Production Ltd. v Harold Smith (Motors) Ltd. [1965], 1 WLR 623
Furmston, M.P., Cheshire, G.C. and Fifoot, C.H.S.(2012) Cheshire, Fifoot and Furmston’s law of contract. NY: Oxford University Press. Pp. 1-100.
Gao, L., Huang, J., Chen, Y.J. and Shou, B.(2013) An integrated contract and auction design for secondary spectrum trading. IEEE Journal on Selected Areas in Communications. 31(3), pp.581-592.
Harris vs Nickerson [1873] LR 8QB 286
Harvey vs Facey [1893] A.C. 552
Heeney, C.( 2012) Breaching the contract? Privacy and the UK Census. The Information Society. 28(5), pp.316-328.
McKendrick, E. (2014) Contract law: text, cases, and materials. UK: Oxford University Press .pp. 1-10.
Oscar Chess Ltd v Williams [1957] 1 WLR 370
Partridge vs Crittenden [1968] 2 All ER421, HC QBD
Pultrone, C.( 2012) An overview of contract farming: legal issues and challenges. Unif. L. Rev., 17, p.263.
Redgrave v. Hurd [1881] 20 Ch D 1
Riefa, C.( 2016) Consumer protection and online auction platforms: Towards a safer legal framework. London: Routledge. Pp.1-10.
Smith vs Land & House Property Corp [1884] 28 Ch D 7
Warlow v. Harrison [1859] CEXC 26 NOV 1859
Whittington v. Seale-Hayne [1900] 82 LT 49
Wilkinson-Ryan, T.( 2012) Legal promise and psychological contract. Wake Forest L. Rev. 47, p.843.
Zulhafiz, W.( 2015) Unfair Contract Terms Act 1977: does it provide a good model in regulating risk allocation provisions in oilfield contracts in Malaysia?. International Journal of Trade and Global Markets, 8(1), pp.3-16.
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