Discuss about the Exclusion Clauses and Unfair Contract Terms.
Contract law is a very basic, but very detailed law and it has various different aspects, which have to be adhered properly. This legal essay contains a discussion upon the various elements of a contract, in addition to the manner of establishing a breach of contract. The discussion would also include the manner in which each element of contract impacts the formation of contract, exclusion clause, as well as, the postal rules. Hence, the case study would be analyzed with the help of contract law and its various aspects. Through the analysis of case study, with the applicable laws, it would be established that Joseph and Clara cannot initiate any legal actions against Marshall as there is no counter-claim. Further, it would also highlight the success of legal action against Joseph and Clara by Marshall for the breach of contract. However, Edward would not be successful in raising this claim.
The contract can be stated as an exchange of promise, which takes place between two more parties, for a consideration. There are two manners in which a contract can be formed, i.e., the contract where the contractual terms are discussed in an oral manner and is known as an oral contract; and the other one is the written contract, in which the contractual terms are discussed and after discussion, put on a document, which is then signed by the contracting parties.
For the creation of a valid contract, it needs to have the six essential elements, offer and acceptance, consideration, intention to form legal relations, genuine consent, contractual capacity and legality of objects. The first essential element in a contract is to have an offer. It is crucial to make a differentiation between an offer and an invitation to treat. An invitation to treat represents the interest and the willingness to enter into the stage of negotiations. The advertisements which are covered in magazines or the newspapers are taken to be an invitation to treat, instead of an offer. A prime example of this is the case of Partridge v Crittenden, where the advertisement in magazine was held to be the invitation to treat. This is the reason why the courts rule that in case of an invitation to treat, the individuals are not required to complete the sale. However, where a unilateral offer is published in a newspaper, in such a case, the advertisement would be treated as an offer, and the prime example of this is Carlill v Carbolic Smoke Ball Company.
Joseph had given the advertisement in the local newspaper, which was not a unilateral offer, as it opened the channels for further negotiations and invited the prices from the interested parties. Being an invitation to treat, Clara and Joseph were not obligated to accept the replies of either Edward or Marshall as per Partridge v Crittenden. The reply to this invitation dating February 8th 2017 by Marshall and the one dating February 12th 2017 by Edward would be deemed as the offer. As these replies were the answer to the negotiations initiated through the invitation to treat, they would be deemed as offer.
The second element of contract relates to the acceptance to the offer. Whenever an offer is made by one party, it has to be accepted by the party to which the offer was made, as it was made. If the offer is modified or amended in even the minutest of ways, it is deemed as a counter offer, and a prime example of this is the case of Hyde v. Wrench. The acceptance can also be communicated through post. When an acceptance is posted, the date of posting the letter of acceptance is taken as the date of acceptance by the party. The reason behind this is that the postal office is the implied agent of the posting party, and so, the receipt of such office is deemed receipt by the other party. It remains irrelevant whether or not such communication is received by the offering party. The contract was held to be enforceable due to the date of postage being the date of acceptance, in the case of Adams v. Lindsell.
The rules of postage apply to the electronic communication as these are considered to be the digital equivalent of the postal system. Hence, when an email is sent, containing the offer or acceptance of the contracting parties, the date of sending such an email is taken to be the date of offer or acceptance. The key objective behind this concept is the meeting of minds of the contracting parties. For the case study given here, the offer was sent through an email. So, applying the postal rules, the date of offer would be the email date. For the acceptance part, the acceptance was made by Marshall to Joseph on February 13th 2017, through, Edward never accepted the offer.
Another element of contract relates to the consideration, without which, a contract is invalid. In both the offers, by Marshall and Edward, there was a consideration of $40 per square meter and $38 per square meter, respectively. The terms of the contract were clear. There was legal capacity, and genuine consent as there is nothing to show others. And the terms of the contract were also legal. And so, due to presence of the elements of contract, a contract was formulated between Clara-Joseph and Marshall. Though, due to lack of acceptance to the offer of Edward, a contract was not formed.
Often a term is included in the contract, which has the power of restricting and limiting the rights or liabilities of the parties and is known as the exclusion clause. An exclusion clause can only be valid when it is included properly in the contract and is not contradictory to the law or the applicability of such law. The exclusion clause needs to be inserted at the time when the contract is formed and if it is are incorporated later on, it becomes invalid. In L’Estrange v Graucob it was held that it is not necessary for the plaintiff to have read the exclusion clause. Though, in case the exclusion clause is stated elsewhere, it becomes significant that it is properly brought to the attention of the party against which it is included. Since the exclusion clause was contained at the back of the ticket, in Chapelton v Barry UDC and the same was not brought to the attention of the party, it was deemed as invalid.
In the case study, the exclusion clause was not contained in the contract and instead, was contained in the standard form by Marshall. And so, as per Chapelton v Barry UDC, this exclusion clause was invalid. This was also invalid as Marshall failed to highlight the same in front of Joseph.
A breach of contract occurs in such situations where the party to the contract falls short in fulfilling one or more terms of the contract. In case of breach of contract, the aggrieved party can apply remedies in form of monetary, as well as, equitable damages. In this case study, Joseph stopped Marshall from carrying on his work. Even though the work was not performed by Marshall, but it was due to the actions of Joseph, hence, Joseph breached the contract. For this breach, Marshall can claim monetary compensation. But, as a contract was not formed between Edward and Joseph, a breach cannot be established.
After the incident with Marshall, Joseph responded to the offer of Edward, by changing the terms, where by the work had to be initiated upon the attainment of structural soundness of the floor. So, as per Hyde v. Wrench, this is a counter offer. This contract was formed later on, and as the work has not yet been stated by Edward, the contract has not concluded and a breach is not present.
The point regarding the counter-claim could have been made by Joseph and Clara, only when Marshall had failed to discharge his part of the contract. Even though they could raise the point, that due to the lack of proper work by Marshall, the flooding was caused, but Marshall never refused to continue or correct the work. He was deliberately stopped from doing his work by Joseph and Clara and so, there is no counter claim which can be made in this case.
Through the analysis of the case study, with the applicable laws and the leading cases, the contract was established. A contract was formed between Marshall and Joseph-Clara, which was breached by the latter and had to compensate the former for such breach. But, for the lack of work done in proper manner by Marshall, he would have had to counter-compensate Joseph-Clara, only if he had refused to correct his work. Since no such thing was done, a counter-claim cannot be made by Joseph and Clara. Though, the exclusion clause, was invalid, and would not be of any assistance to Marshall. Though, there is no legal liability arising for Joseph-Clara due to their contract with Edward.
Abbott K, Pendlebury N and Wardman K, Business law (Thompson Learning, 8th ed, 2007)
Carter JW, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007)
Latimer P, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
Lawson RG, Exclusion Clauses and Unfair Contract Terms (Sweet & Maxwell, 10th ed, 2011)
Macdonald E and Atkins R, Koffman & Macdonald’s Law of Contract (Oxford University Press, 8th ed, 2014)
Adams v. Lindsell (1818) 106 ER 250
Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
Chapelton v Barry UDC (1940) 1 KB 532
Hyde v. Wrench (1840) 3 Beav 334
L’Estrange v Graucob [1934] 2 KB 394
Partridge v Crittenden [1968] 1 WLR 1204
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