Understanding Commercial Negotiations Under Contract Law: An Analysis

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Discuss About The Crawford In Judith Smart And Kim Humphery?

The creation of commercial contracts starts with the identification a commercial opportunity, then followed by the identification of the parties. From there, the process of negotiation begins. Sometimes the law of contract may seem to suggest that the process of offer and acceptance happen consequently. However, commercial contract sometimes takes a long time in the negotiations. If parties do not get into an agreement, that leave the negotiation and focus on finding other opportunities. This paper will be an exploration of instances where failure in the negotiation results leaves the parties wondering whether there was a deal or there was no dea.

Contract law calls some doctrines when identifying that the parties have objectively shown their consent to form a contract. In this regard, one of the doctrines is known as the concept of offer and acceptance. In general, a formal agreement must have an offer, and the offer must be followed by an acceptance.[1] In addition to that, the promises would need a consideration among other requirements to become a legal binding agreement.[2] Each of these elements has a guiding rule. For instance, a successful offer must be made by the offeror, and communicated to the offeree.[3] The offeror must also be clear with a manifested intention to be bound. On the side of the offeree, he or she should accept the offer, and the acceptance should be unconditional. Also, the offeree must communicate the acceptance to the offeree, and demonstrate the intention to be bound. An agreement should also have a consideration, this one is the element of the bargain. It is the item of value that moves from one party to the other.

Before parties enter to an agreement, they may choose to first negotiate. It is a fundamental rule in contract law that mere negotiations do not make binding obligation.[4] Rather, parties must show their intention to be bound by the agreement. An inquire means to seek clarification and it is neither an offer nor an acceptance.[5] Sometimes, however, during the negotiation, the intention of parties becomes clearer indicating an intention to be bound.[6] For instance, where parties sign preliminary negotiations or one party makes comments like “we have a deal.” In such cases, the court weighs the competing interests. In this, where the negotiations were full of offers and counter offers, the court’s objective method will signify an absence of a contract.  That is, the clearer the intention, and the completeness of the negotiations, the higher the chances of concluding that there was an agreement. Similarly stated in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd, [1988] that the more the gaps, the lower the chances that parties intended to be immediately bound by their negotiations.[7]

This question is a matter of a dispute to substantial performance.

A high-profile case that this paper would look is the highlights of Masters v Cameron [1954].[8]  This case arose from a document containing the parties’ terms. It was a question whether the document was a binding contract or it was merely an agreement to negotiate terms which were to be part of the contractual terms. In deciding the issue, the High Court stated that since the wording of the clause suggested that that there remaining more step towards completing the document to become enforceable, the document terms were not binding on the parties.

The price quote could not amount to a binding contract. Even though there are inquiries from customers that can amount to a binding agreement, the inquiry from Lenna very much fitted to be an opening to a negotiation. Even though a demonstration of assent to agree is an offer instead of preliminary negotiations, the terms must be so definite that the other party just needs to respond with an “yes.” It is more of the objective approach whether a reasonable man would see Linna’s enquiry as an offer, not whether the offeror has a thought of making a contract. Compare this between this case and Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] buyer who made a verbal purchase offer for $1.6m, and gave the conditions within the offer. The offeree (seller’s agent) replied with instructions for signing the contract. The emailed contract comprised of the price, the deposit amount, settlement date and other conditions. The buyer confirmed, though the negotiations continued with the buyer requesting an immediate acceptance of an offer which the seller accepted. However, the buyer continued to pledge on further amendments of the contract. In the meantime, the seller found another buyer. The court found that the seller was bound by the agreement with the first buyer. By all these analysis, Mary’s claim that the enquiry quote was a binding contract would fail in the court.

Intentional or unintentional failure to comply with all the terms will result in a breach. For a substantial performance, the exact performance should not deviate exceedingly from what that party promised to offer or fulfil the contract.[9] Besides, a substantial performance must provide the corresponding benefits as those agreed in the contract. If there is omissions, variances, or errors in performance, a party providing non-substantial performance would not receive a full contract price. The actual cost is usually the amount of the contract less the amount for the uncompleted obligations.[10]  In general, when it comes to the issue of performance, courts usually handle such cases depending with the matter. The court tries to examine all of the facts regarding each particular situation. Where the performance is substantial, and the other party is denying it, the court is likely to order a full pay.

Legal Rules Governing Advertising

A land mark case of this nature is Hoenig v Isaacs [1952].[11] The claimant contracted the defendant for a decoration and furnishing project.  The claimant was to work on the project for £750. The defendant gave £400, but he declined to pay the balance of £350 due to defects that the claimant left on the wardrobe and bookcase estimated to cost £55 for correction. The court awarded the claimant the contract price less the cost that the defendant would undergo for corrections.

Compare the difference, with a case where the performance is fully defective in Bolton v Mahadeva [1972][12]

The claimant was hired to fit central heating system, in the defendant’s home for £560. The defendant was not satisfied with the work and hence he refused to pay. The cost of repairing the defects amounted to £174. The court dismissed the claimant’s claim for the payments there was no material performance.

By analysis, if Lianne goes to court, the court will allow to pay for the price of the actual services provided. If the actual price of the requested service was reduced from $10,000 to $9,500, this calculates 95% of the actual price. Therefore, Lianne may argue to get the standard price of the service provided, and pay 95% of that price.    

Legal rules governing advertising do not apply only to one method of advertising, but they encompass all context as well. For example, in Australia as well as any other part of the world, the laws regulate any advertisement be it oral, written, visual presentations, numbers, audio effects, music or anything they contain.

In any advertisement, there are essentially three key players. These are the advertisers, the consumers, and the intermediaries.[13] This interrelationship usually brings about legal issues that attract the intervention of the privacy laws, consumer protection laws, and trademark infringement laws. However, the same demands need to strike a balance between the legal remedies to these legal issues and the advancement in competition within the online environment.

These legal remedies should encourage free zone for businesses competition where there is the promotion of brands, products, and services. On the part of trademarks, the work of the law is to promote the fair use of these marks. At the same time, the increased deceptive and misleading practices in advertisements attracts consumer protection laws. Online advertisements can hurt customers by deceiving and luring them into non-welfare-maximizing contracts.[14] In every state, the courts and other government authorities work to oversee the administration of the standard consumer protection principles regarding advertising. In overall, advertising practice aims to present an exhibition of upright conduct, improve dependability and assurance, ensure responsibility concerning children affairs, and to promote freedom of speech within marketing and communications arena.

The Australian Consumer Law (ACL) is the main statute in Australia that oversee customer protection in businesses. The law applies uniformly to all businesses within the Australia. ACL protects the expectations of the customers in the way business conduct themselves. On the other hand, businesses do have their obligations as far as they operate within Australia.

Firstly, it is a requirement from the act that products and services that are accessible for purchase by consumers have the coverage of statutory consumer guarantees.[15] These customer guarantees include the supplier’s right to sell the goods. The customer must guarantee that the goods are matching their description. Also, such goods must be of acceptable quality. All the goods should be fitting for any the drive that the consumer discloses to the supplier.[16] On the part of repairs and spare parts, the customer should guarantee that they are reasonably available. The customer should also guarantee that the services given by the business are provided with reasonable skills and care.[17] Besides, customer should guarantee the completeness of the service within a reasonable.

On the part of the businesses, ACL prohibits certain conducts. The act prohibits against all actions of misleading or deception.[18] This provision prohibits all unlawful conducts that communicate misleading or deceptive statements. It also demands that businesses should provide relevant information to the customer.[19] ACL also prohibits unconscionable conducts. According to the act, a court can take an action against the business after identifying that a certain conduct is unconscionable conduct. The ACL also stretches to prohibit business terms that are unfair terms to the consumers. A court has the power to declare a certain term unfair depending with its interpretation.[20] The act also prohibits unfair practices in business such as bait advertising.

While creating advertisements, business owners should also have a background of the principles of contract law regarding advertisements.[21] For instance, advertisements on magazines, newspapers, or posted ads on websites are not offers but rather invitations to treat as far as they a heading ‘offer for sale’[22]. An application of this concept was in the case Partridge v Crittenden [1968][23]. Mr Partridge was allegedly arrested for selling a wild bird. He had placed an advertisement on a magazine. The court reasoned that it was the action was not an offer but an invitation to treat.

However, sometimes the language of an advertisement can make it look like an offer. At such situations, if a customer accepts the offer, a binding agreement would be formed as in Carlill v Carbolic Smoke Ball Company [1893][24]. The defendants had placed an advertisement for am medicinal smoke ball. The advertisement alleged that the item can prevent influenza. It alos stated that the defendant would pay £100 to anyone who would contract influenza having used the smoke balls. The claimant used the smoke ball, contracted influenza and then sued for damages. The court affirmed that the advertisement was an offer and the defendant was liable for damages.

Regarding advertisements, ACL The ACL prohibits various advertisement practices. Some of these are bait advertising, and misleading advertisements. The law prohibits businesses from offering prizes or gifts with a plan of withholding (section 32). Bait advertising is a practice where a business advertises goods a price knowing well that the products won’t be available for that price.

The issue of privacy is another thing that demands government intervention. Indeed, the demand for internet and information technology is growing, and hence the need to protect users’ data and information. This principle should remain one of the crucial objective that online businesses should strive to adhere to. Internet is about the exchange of data either for spreading it or gathering it. One of the primary reason behind people’s inclination to advertisements is its customer target approach. However, these targeted ads require collecting personal data and information hence raising privacy concerns. In the process of using these ads and advertisements to the targeted customers, it is a fact that the same ads collect customers’ personal data and information, thus leading to privacy worries. Take for example the DoubleClick Inc 2001 privacy litigation.[25]   The plaintiff alleged that using website cookies violated a number of federal laws. The court found that it is true that the claimed cookies attached to users’ hard drives were gathering some users’ data. While the court did find that DoubleClick Inc used cookies to collect information, there was no access to user’s information. However, the court also emphasized on seeking the user’s “consent.”

The issue of unsolicited commercial e-mails is another problem with consumers.[26] While numerous states have allowed spamming, their regulation instructs senders to give users choices for opting not to get future emails.[27] Other laws prohibit sending of deceiving spams or false return address. When it comes to trademark issues, Trademark dilution happens through using someone’s trademark in a way that diminishes the distinguishing quality of that mark without the owner’s authorization.[28] Trademark infringement happens when someone uses of other’s trademarks or service marks without their authority when competing or when selling related goods or services.[29] In this regard, it is well clear that trademark laws can accomplish their ultimate mission which is to protect the original owners and accord them their recognition for their work, which is so hard to achieve without government intervention.

References

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Mann, Richard A, Barry S Roberts and Len Young Smith, Smith & Roberson’s Business Law (South-Western Cengage Learning, 15th ed, 2012)

Hough, Tracey and Kathrin Ku?hnel-Fitchen, Optimize Contract Law (Taylor & Francis, 2016)

Clarkson, Kenneth W et al, Business Law. Text and Cases (Cengage Learning, 13th ed, 2015)

Marsden, Gregory J. and George J. Siedel, “The Duty To Negotiate In Good Faith: Are BATNA Strategies Legal?” (2017) 14(1) Berkeley Business Law Journal https://scholarship.law.berkeley.edu/bblj/vol14/iss1/4/

Monaghan, Nicola and Christopher Monaghan, Beginning Contract Law (Routledge, 1st ed, 2013)

Elias, Stephen and Richard Stim, Trademark (10th ed, 2013)

Miller, Roger .L, Business Law Today, Comprehensive (Cengage Learning, 11th ed, 2016)

Schwabach, Aaron, Internet And The Law: Technology, Society, And Compromises 2Nd Ed (ABC-CLIO, 2nd ed, 2014)

McKendrick, Ewan, Contract Law (Oxford University Press, 1st ed, 2012)

Crawford, Robert, Judith Smart and Kim Humphery, Consumer Australia (Cambridge Scholars, 1st ed, 2010)

Diamond, Shari Seidman and Jerre B Swann, Trademark And Deceptive Advertising Surveys (American Bar Association, Section of Intellectual Property Law, 2012)

Bolton v Mahadeva [1972] 1 WLR 1009 Court of Appeal.

Teachers Ins. and Annuity Ass’n v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987).

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd, [1988] 18 NSWLR 540

Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119

Masters v Cameron [1954] 91 CLR 353

In re DoubleClick Inc. Privacy Litigation, 154 F. Supp. 2d 497 (S.D.N.Y. 2001).

Partridge v Crittenden [1968] 1 WLR 1204

Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1

Competition and Consumer Act 2010