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Law60003 Contract Law: Contract Between Assessment Answers

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Questions:

Case Study 1

Read the following case study and answer all five questions that follow.

Shona is a business student at University and she is approaching her final year exams. Shona is trying to catch up on some essential last minute studying and is seeking to buy books to help her prepare. She sees an advert pinned to the business school noticeboard of the faculty where she studies.

The advert reads:

Business studies — text books — unused — happy to discuss what you need.

Anyone who is interested please contact Raymond on 000111222.

Shona is very excited by this and immediately telephones Raymond. Shona tells Raymond that she wants to meet him and Raymond agrees to meet her at the refectory. When they meet Shona discovers that Raymond has three new text books but they are not for the subjects she is studying. Shona tells Raymond she does not want them. Raymond is very angry and says that she has wasted his time and train fare getting there and demands that Shona buys the books. Shona refuses and says that she wants business text books like the ones Raymond mentioned in his advert. Raymond says that he had some Business text books but that he had sold them by the time Shona called and that these are the only books he has left and that Shona must take and pay for them. Raymond states that he has studied business and that he and Shona have a contract between them and she must buy his books otherwise he will take a legal action for the value of the books, his train fare and for wasting his time. Shona states that she will take a counter action against Raymond for his failure to provide what he had offered.

Shafiq owns a property business and he is seeking some advertising materials. He is searching online and discovers ADS-FOR-YOU who are a provider of advertising materials at a very reasonable cost. Shafiq sends an e-mail to the company making clear all of his requirements. The company responds quickly with an e-mail stating that they can meet all of his requirements but Shafiq is disappointed to read that the price is far more than what they appeared to advertise on their website. Shafiq decides not to buy anything from them and deletes the e -mail without replying to it. A few days later Shafiq is checking his e-mail and he sees that ADS -FOR-YOU sent Shafiq another e -mail that stated, ‘We are sure that you will be impressed by our products and prices,’ and, ‘If we do not hear anything from you within 24 hours we will take this as your acceptance and we will send the materials and charge you for the amount stated.’ Shafiq realises that this was three days ago and is now concerned about paying for something that he doesn’t want.

Veronika has bought a large house that requires renovations. Once the repairs have been completed, Veronika intended selling the property at a significant profit.


Veronika has, however, discovered that she does not have the finance available to carry out the renovations. A friend of Veronika's family, Johnathon Harker, is a builder and he speaks to Veronika about her situation. Johnathon agrees to complete all the necessary work for Veronika.

On completion of the work Veronika completes a document stating, ‘In consideration of you, Johnathon Harker, carrying out the renovations required, I agree to pay you £8,000 from the proceeds of sale of the house.’ Veronika sells the house at a considerable profit. Three weeks later Johnathon has not been paid for his work.

Chung Lee is a property developer and he has been discussing the purchase of a very desirable piece of land near the city. Chung Lee has been meeting a representative of the developer, Katie Owen, to agree the terms of the potential sale. Katie is a new member of staff and is very keen to agree her first sale. Chung Lee and Katie have a final meeting where Chung Lee makes an offer of £1.5 million for the land. Katie enthusiastically agrees and proceeds to take note of all of Chung Lee’s requirements and details. Katie provides him with a bank account to transfer the money too. Chung Lee instructs his bank to transfer the funds and leaves the meeting very happy. Later that day Chung Lee is contacted by his bank to say that the money has been returned without explanation. Chung Lee calls Katie and angrily demands to know what is happening with his newly purchased property. Katie tells Chung Lee that the property is not his and that he has no entitlement to anything.

Chung Lee is furious and tells Katie that he has already made plans for developing it and they have a binding contract between them. Katie again repeats that the property is not his and refuses to comment further.

Ralpinda, Daphne and Ted are friends who share a flat together. They are redecorating and looking for new furniture. Ralpinda sees a television for sale on the website SELL-YOUR-STUFF.COM and arranges to meet the seller at their home to view the TV. Daphne and Ted visit their local HOMEBUYS store where they see some furniture on sale. Ted sees a new large sofa on display that is reduced and appears to be a bargain. The sign on the sofa clearly states ‘Mahogany hardwood family sofa — end of season sale — £100.’ Ted and Daphne tell the sales staff that they want the sofa and they wait at the cash desk.

At the cash desk Daphne sees a large sign that states ‘No refunds on any goods under any circumstances’. She points this out to Ted but Ted says to ignore it because HOMEBUYS are a reputable brand. Meanwhile, Ralpinda buys the TV and takes it back to the flat. Daphne and Ted arrive home with the sofa and with Ralpinda they all sit on their new sofa together to watch the TV. When they turn on the TV they find that the picture is very poor and that there is a very noticeable interference in the sound. As they sit there, they hear a loud cracking sound and realise that the sofa has broken in half. On closer inspection Ted finds a sticker on the leg of the sofa that states ‘100% plywood’ and not mahogany hardwood as advertised.

Ted and Daphne return to the store where the manager points out the ‘No refunds on any goods under any circumstances’ sign and denies any responsibility for the sofa breaking stating that the sofa was for ‘decorative purposes only’ and wasn’t meant for sitting on.

Daphne points out the label that was on the sofa that states ‘family sofa’ and ‘Mahogany hardwood’ but the manager ignores her and walks away. Meanwhile, Ralpinda has telephoned the man who sold her the TV and complained about it not working. Ralpinda says that she demands her rights as a consumer and to receive her money back. The man replied that it was second hand and what did she expect? The man adds that it was a private sale so she can’t do anything about it anyway.

Tasks:

1.

  1. With reference to the above scenario explain what would be required to create a legally binding contract between Shona and Raymond ANDadvise whether, in the scenario above, there is a contract between them. 
  2. With reference to the above scenario explain the legal position of Raymond’s advert - is Shona correct in her assertion that Raymond must deliver what he has offered?

2.

With reference to the above scenario advise Shafiq as to whether he must pay for the advertising materials. 

3.

With reference to the above scenario and with reference to Statute where applicable, explain the rules of contract as it applies to Johnathon AND whether he is entitled to his £8,000.


4.

With reference to the above scenario advise Chung Lee as to whether he has a binding agreement with Katie meaning that the property is indeed his. 

5.

With reference to the above scenario explain the legal effect of the ‘No refunds on any goods under any circumstances’ sign at the cash desk with regards to the sofa AND explain to Ralpinda what her rights are regarding the TV. (5 marks)

Case Study 2

Read the following case study and answer the questions that follow.

Kieran is an avid fan of martial arts movies. He attends his local martial arts club but he really wants to copy the actions of his favourite martial arts movie characters. To copy his favourite actors Kieran wants to use a folding knife throwing weapon that he sees the characters using in the films. Kieran visits his local equipment supplier, KUNG-FU-KIT, and orders a folding throwing knife like those available in Japan.

Kieran pays £100 for the knife. The manager of the store tells him to return in a week when his order will be in stock. Seven days later Kieran returns to the store only to be told by the manager that they cannot sell the knife as weapons of this type are prohibited in the UK.

Kieran is furious and very disappointed. Kieran states that the store must honour their contract to sell and deliver the knife.

Saba is a friend of Kieran and has been in a relationship with her partner Aisha for several years. They have both decided that they wish to get married under the recent Marriage (Same Sex Couples) Act 2013. Aisha is, however, very jealous and has agreed to marry Saba only on the grounds that she signs an agreement that, should their relationship finish, Saba will never marry again nor can Saba pursue Aisha for any form of financial support following any break up regardless of the grounds for that support. Aisha has told Saba that this agreement is legal and binding upon them. Saba is now worried about whether she should marry Aisha on these terms.

Dirk and Harry share a large house with three others. Dirk and Harry have applied for credit cards in the names of the other occupants of the house. They both agree a plan to intercept the mail on its arrival, and, using the cards and PIN numbers intended for the others, use the cards to buy goods and cars and then travel to Europe. Dirk and Harry exchange e-mails which outline their plan and an express agreement that all of the proceeds of their plans will be split equally between them. The cards and PIN numbers duly arrive and they are quickly intercepted by Dirk and Harry.

Dirk immediately takes the cards and purchases a second hand car and lots of high value stereo equipment, clothing and travel tickets to Europe. Without telling Harry, Dirk leaves the country intending not to return. Harry is furious and sends an e -mail to Dirk claiming his rights to half of the proceeds of their plan and threatens to take a legal action based on their agreement.

Naomi studied agriculture at University and has decided that she wishes to begin a small business rearing livestock on some land. She is fortunate that her late grandmother owned a small house in the country near the University where Naomi studied and Naomi has now moved into the property and is beginning to plan her new enterprise. The house has a large garden but she realises that she needs more land to accommodate her livestock so she contacts a neighbouring farmer to offer to purchase a piece of land that is adjacent to her own garden boundary. Naomi wants to save as much money for the purchase so makes her own initial negotiations with the neighbour who is keen to sell the land for a price that Naomi believes is very reasonable.

Naomi and her neighbour exchange some informal hand written letters agreeing that the land will be sold to Naomi for the price of £5,000. Naomi replies with an agreement to buy the land and states she will pay the neighbour the £5,000. Naomi then seeks the assistance of a conveyancer to have a proper contract drawn up for the sale of the land. When speaking to the conveyancer Naomi discovers that she does, in fact, already own the land as shown by her property title and that it had always been part of her grandmother’s garden. Naomi contacts her neighbour to advise them of this only to be told by them that they had absolutely no idea that was ever the case and that they consider the correspondence between them as evidence of a binding contract and that they fully intend taking a legal action against Naomi for the £5,000.

6.

With reference to the scenario above, explain whether Kieran has an enforceable contract with KUNG-FU-KIT. (Your answer should focus on the legality of the contract and not any applicable legislation governing the sale of offensive or dangerous weapons.)

7.

With reference to the scenario above, explain to Saba whether the agreement, she has entered with Aisha is enforceable and binding. (Your answer should focus on the legality of the contract and not any applicable legislation governing same sex marriage.)

8.

With reference to the scenario above, explain whether Dirk and Harry have an obligation in law to split the proceeds of their plan. (You are not required to consider any crimes that may have been committed within the scenario).

9.

With reference to the scenario above, explain to Naomi whether there is a binding contract between her and her neighbour. (Your answer should focus on the legality of the contract and not any applicable land law or legislation governing the sale of land).

Case Study 3

Read the following case study and answer the questions that follow.

Steven has recently purchased and owns a Norton ‘Dominator’ motorcycle and a Norton ‘TT Racing’ motorcycle which he has now advertised for sale. Steven believes that these two motorcycles were part of a previous collection of classic motor vehicles owned by the late actor and racing driver Steve McQueen. Steven knows that motor vehicles from Steve McQueen’s collections are fetching very large sums of money at classic motor vehicle auctions both in the UK and in Europe. Steven writes to his friend Brian, offering to sell him his ‘little beauty’ (meaning the Norton ‘Dominator’ motorcycle for £30,000. Brian is a collector of classic motorcycles and thinking that Steven is referring to the Norton ‘TT Racing’ motorcycle, accepts, saying: ‘Dear Steven, I am delighted to accept your offer and this will become a valued part of my collection of period racing vehicles.’ Steven delivers the Norton ‘Dominator’ motorcycle to Brian’s home whilst Brian is not at home. Brian returns home and finds the ‘Dominator’ and is quite confused. Brian believed that he was buying and more importantly wanted the Norton ‘TT Racing’ motorcycle and not the ‘Dominator’. Before Brian can return the motorcycle another friend, who is an authority on classic vehicles and in particular the collection of Steve McQueen, visits him and tells him that the Norton ‘Dominator’ is actually in very poor condition and has been fitted with non-original parts of poor quality and not worth more than £5,000. He does state, however, that a Norton ‘Dominator’ motorcycle in first class condition would have been worth £10,000 to £20,000. Steven, it seems, had bought the ‘Dominator’ for only £2,000. Steven refuses to take the motorcycle back and insists that Brian must pay him £30,000.

Kiran and Tasmin have been work colleagues for 10 years. Kiran is selling her motor home, a Beaumont Continental, for £20,000. Kiran tells Tasmin that it is only three years old, low mileage and has recently been serviced with brand new tyres, exhaust and central heating system. The vehicle is, in fact, six years old and the display showing the distance travelled by the vehicle is faulty and the mileage is much higher than shown. The tyres that have been fitted were badly worn remoulds from a small garage in the town and the exhaust has had some minor patches applied to try to stop it smoking badly. The central heating system had no work done to it except a fluid top up but it works only intermittently. Tasmin admits to Kiran that she knows absolutely nothing about motor vehicles of any kind and she needs something that is reliable and capable of crossing Europe during the summer holidays that she has planned. Kiran assures Tasmin that this is the vehicle she needs to take her effortlessly on her travels.

When Kiran and Tasmin were discussing the sale Kiran provided Tasmin with various documents which detailed the apparent extensive service and maintenance history since the motor home was first purchased. The documents were inaccurate but they did state the true age of the vehicle and Tasmin would have seen this if she had examined them closely. On the eve of her summer holiday Tasmin arranges to meet Kiran and following a very brief inspection of the vehicle Tasmin agrees to buy the yacht for £20,000. Kiran presents Tasmin with a piece of paper that Kiran refers to as there, ‘Contract of purchase and sale.’ Tasmin reads the paper that contains assurances on the vehicles condition and roadworthiness based upon Kiran's prior statements regarding the vehicle tyres and exhausts. Tasmin also notices a statement that reads, ‘On signing this contract the buyer accepts that Liability for any pre-contractual misrepresentation will be excluded.’ Tasmin signs the piece of paper and hands over to Kiran a cheque for £20,000. The next week when Tasmin is driving the motor home to the ferry terminal to begin her long awaited holiday she smells strong exhaust fumes and feels that the steering is pulling sharply to the left.

On stopping the vehicle Tasmin inspects the tyres closely and sees that the front left tyre has a serious tear and the others are almost without any tread on them and is unusable. She also sees plumes of dark exhaust smoke pouring from what appears now to be a badly mended rear silencer. On closer inspection Tasmin notices that there is a pool of fluid from a leak under the vehicle which, unknown to her, is pouring from the broken central heating system in the vehicle. A roadside recovery vehicle attends and the mechanic advises Tasmin that in his professional opinion the vehicle is a ‘death trap’ and should not be driven under any circumstances.

10.

  1. Using case law where appropriate and with reference to the facts of the scenario above, explain the legal situation that exists between Steven and Brian. 
  2. Using case law where appropriate and with reference to the facts of the scenario above, are there any legal remedies available to Brian and, if so, clearly explain what they are.

11.

  1. Using case law where appropriate and with reference to the facts of the scenario above, explain the legal situation that exists between Kiran and Tasmin in regard to the sale of the motor home.
  2. Using case law where appropriate and with reference to the facts of the scenario above, does Tasmin have any legal remedies available to her and, if so, clearly explain what they are.
  3. Using case law where appropriate and with reference to the facts of the scenario above, explain the legal position of the statement, ‘On signing this contract the buyer accepts that Liability for any pre-contractual misrepresentation will be excluded.’

Answers:

1.

a. To create a contract between Shona and Raymond, some elements must have been there such as:-

-     There must be an offer whether in writing or in verbal mode (jifkins, 2017).

-     Offeree must accept the offer before it is revocation by the offeror (Tepper, 2014).

-    Such acceptance need be free from fraud or misrepresentation or any kind of undue influence of a person who made an offer.

-    Consideration is also a requirement to create a contract. Consideration in a contract must be sufficient and valid (The Lawyers & Jurists, 2018).

-    To create a legally binding contract, parties to an agreement must have the intention to bind each other legally.

In the given case, details written on notice board were an invitation to treat.  Shona just showed her interest but did not make an offer. Further, nothing is mentioned about acceptance, consideration, and intention of the parties. So in this scenario, it may state that there was no contract in between Shona and Raymond.

b. As mentioned above that there was no contract between Shona and Raymond, so in this way, they both will not be liable towards each other in terms of Contract Law. Here this is to mention that Raymond has shown invitation to treat. Shona did not make any offer, instead, she only called Raymond to meet and discuss the books.  No question of acceptance of offer could be there in the absence of a valid offer. Raymond has stated to Shona that he will take a legal action against her as she breached the contract, but he cannot do so as there was no contract in between both of them.

Further, an invitation to treat is a kind of advertisement and cannot be considered an offer. Further, an invitation to treat does not bring any legal liabilities to parties, so Shona is not correct in her assertion and the Raymond was not liable to deliver the books he offered.

2.

Here, in the given case, Ads-For-You made an invitation to treat and Shafiq by sending an e-mail, made an offer. In the said e-mail Shafiq has mentioned his entire requirement. He received an e-mail from Ads-For-You and he got disappointed by looking at the prices quoted by the advertising company. Here this is to state that in contract law when offeree does not merely accept the offer but mentioned something which has an impact on the original offer, such acceptance termed as “counter offer” (Lexinter, 2018).

In this situation, Ads-for-You made a counter offer which was expected to be accepted by Shafiq but he did not do the same, so no contract has established in between Shafiq and Ads-for-You. Further, it was held in the case Felthouse v Bindley (1862) EWHC CP J 35 that silent cannot be treated as acceptance in a contract, so in the studied case Shafiq is not liable to pay anything to an advertising agency.

3.

In the studies case, Veronica has completed a document stating that she will pay $8000 as consideration for the renovation of his house. Veronica has mentioned in the aforesaid document that she will pay this amount to Johnathon Harke on the event of a sale of her house.


In the contract law, it is stipulated that for a valid contract there must be a valid offer and acceptance and consideration is also an important element (Findlaw, 2018). It was held in the case Chappell v Nestle [1960] AC 87 that consideration must be sufficient but need not be adequate. As in this case all the situations are satisfied for the creation of a legal binding contract, Veronica must have paid the decided amount $8000 to Johnathon Harke according to conditions of the contract. As she has failed to do so, Johnathon is entitled to receive this amount form, Veronica.

4.

In the referred case, Chung Lee has made an offer £1.5 million for purchase a land and Katie who is representative of the developer has agreed upon this. To enter into a contract there must be acceptance of the offer, and by providing bank account details Katie has provided her consent. Consideration also has decided between Chung Lee and Katie, so in this manner, there was a legal contract between both of them.


Here this is also significant to mention that law of agency will also be applying in this case as Katie was acting like a representative or agent on behalf of her developer. As it is stated under Agency law that a principal will be liable for the act of his/her agent (Kudrat, 2015).In this case, Chung lee can bring an action against Katie as well as developer and he has entitlement over Property.

5.

It was held in the case Parker v South Eastern Railway (1877) 2 CPD 416 that wherever in an agreement or contract an exclusion clause is mentioned and the parties suffered could have an eye on the same, then the other party will not be held responsible for any loss generated.


Here in the case, Daphne has read out the notice stating “No refunds on any goods under any circumstances” and he also pointed out the same to Ted. So, the manager who sold the sofa will not be held liable for breach of contract. On the other side, Ralpinda has visited seller’s house to view the TV and after that, she purchased the same, so it may assume that she has been made an offer to purchase the TV and it was her liability to check that whether the same is working or not before making such offer. So, Ralpinda has no rights to return the said TV to the seller.

6.

It is common in contract law, that for a valid and legal contract, it is necessary that object and consideration must be valid (Sehgal, 2018). A valid contract cannot be developed with an invalid intention or objective or subject matter. In the given case, Kieran wants to buy a particular kind of knife. At the time of entering into the contract neither she, nor the shopkeeper was able to know that this is an invalid consideration. But later on, when after a week, Kieran visited equipment supplier named Kung-Fu-Kit, she was informed that this is not a valid article to sell in the UK. Now, although Kieran and supplier have entered into an agreement before a week, yet there was a lack of enforceable contract due to the illegality of consideration. So, here it may conclude that Keiran has not any enforceable contract with Kung-Fu-Kit.

7.

In the area of contract law, this is necessary to mention that in a contract there must be an intention of the parties to impose legal liabilities on each other (Out-Law.com, 2018).  As in the given case, Aisha is making an agreement regarding conditions of marriage; this does not create legal liabilities. Agreements which are developed in the course of love and affection cannot be converted into a legal contract. Further, consideration is also an important element of the contract, but here no consideration seems to be there for Saba. In the provided case, if the agreement would have covered only part of the financial arrangement, then this could have been a legal contract, but since other conditions such as restriction on re-marry are also there then in this circumstance, there cannot be the existence of a legal contract.


In conclusion, it is to state that the agreement which Saba has entered with Aisha is not binding an enforceable due to it is nature.

8.

As earlier mentioned that to create a legal contract, consideration, an object of the same also need to be legal (McKendrick, 2017). If two people agree upon to do something which is not legal, so the agreement made in between them cannot be developed into the contract. In the given case, Dirk and Harry planned to intercept e-mails of their flat mate and also have applied for credit cards on their name. In addition to this, they have mutually agreed to go on a Europe trip from the money they would get from such forgery. This is to mention here that the consideration, they both were likely to receive was expected to proceed with an illegal activity and for this reason; there was not any contract between Dirk and Harry.


Dirk later taken all the money and went on a trip alone, Harry is claiming his right, so in order to answer the issue involved in this case, it may state that there is no legal contract and none of the people is obliged to split the proceeds of their plan.

9.

In the given case there could be the existence of a legal contract if Naomi would not come into known that the land she is going to purchase is already held by her grandmother. In the given case, Naomi’s neighbor has made an offer to sell his land to Naomi for £5000 and Naomi also been agreed upon to purchase the said land for the mentioned consideration. This is to state that although the said agreement was on an informal paper the same is irrelevant when it comes to the Contract Law. A Contract can even be in verbal (Pettigrew, 2012). But this is also required that the consideration of a contract must be valid and legal.


In this scenario, later on, it has come into the notice of Naomi that the land she is going to purchase is already registered in the name of her grandmother. This means she was already entitled to use that property. Now the issue is that Naomi’s neighbor is claiming to take an action against her, so whether he can do the same or not. In order to reply to this question, it is to mention that although Naomi was nit updated with the real entitlement of the land, her neighbor must be aware with the same. He could not enter into a sale agreement in respect of a land which is not a part of his property. He was pretending that subjective property belongs to him.


Further regardless the intention of neighbor, he cannot enter into a sale agreement with Naomi for the mentioned land as it would not be valid under the law to further transfer a property which is not owned by him. So, in order to advise Naomi, it is concluded here that there is no binding contract between Naomi and her neighbor.

10.

(a) In the given case, Steven had two bikes namely Norton “Dominator” and Norton “TT Racing” motorbike. He has offered to sell a bike stating “little beauty” to his friend Brian. Brian being a motorbike collector accepted the said offer thinking that the same is “TT Racing” motorbike. But later in he has come to know that Steven has sent Norton “Dominator” motorbike. In addition to this Brian also has come to know that the motorbike he received is worth £5000 only.


Here the issue is to check the legal situation of both the parties i.e. Steven and Brian. Here this is to state that as stipulated under case Chappell v Nestle, that the consideration must be sufficient and the same needs not to be adequate, so in this circumstance, it is irrelevant that what is the exact market value of Dominator bike is. So on this basis; the subjective contract cannot be treated as void or voidable. But on the different side, this is a case where a mutual mistake has been done on behalf of both the parties. There can be two types of mistakes in a contract, one is a mistake of law and another one is a mistake of fact (Laws of Business, 2018). According to the further classification, mistake of fact can be on behalf of a single party or both the parties.


For instance in the case of Raffles v Wichelhaus (1864) 2 Hurl & C 906] both the parties to the case were talking about different subject matter and court held the contract void because no reasonable person could know that both the parties are taking about which cotton as they were using the term “The Peerless” for the same.  In the given case also, both parties i.e. Steven and Brian were using the term “Little Beauty” for the bike and therefore this is a case of Bilateral Mistake. 


(b) In the cases of mutual mistake relating to the identity of subject matter, the court tries to save the contract. In general, in case of mutual mistakes, contracts cannot be rescind. Even in the cases of a unilateral mistake (mistake at the end of one party), contract will not be rescind when the mistake does not make the performance of a contract impossible.

In the given case, Steven and Brian were not clear about the identity of the bike. Where Steven had believed that this is “Dominator”, Brian was thinking that the bike he is going to purchase is “TT Racing” bike so he can deny paying the consideration as this is a Bilateral Mistake. In this area, the decision given in the case of  Great Peace Shipping v Tsavliris International [2003] QB 679 is an important one to consider. In this case the defendant has cancelled a contract by calling the same void because a mistake was there. Court held that until unless a mistake does not make the performance of a contract impossible, the same cannot be held void or voidable.

Further, court also stated that in those cases where a common law does not provide a relief, the equity can also not do so. Applying the provisions of Great Peace Shipping v Tsavliris International, Brian in this case cannot ask a remedy based on equity, as under common law also, he cannot seek any remedy cause of mistake. Further, the mistake outlined in the case i.e. identity of subject material did not make the contract impossible to perform. Rectification of a contract is just another aspect. This concept says that where a valid contract exist between the parties but just because of a term and confusion about a fact in between them, such contract not remain in original condition then rectification of a contract can be made. However for a rectification there should be a match up of minds of parties to the contract. If both the parties do not have same intention then court cannot give order for rectification. In the given case, rectification of the contract can be made if Steven and Brian become agree on one part.

11.

a. In the provided case, Kiran has made a misstatement stating that the motor home, she is going to sell to Tasmin is in really good condition. She further stated that vehicle is only 3 years old and recently been serviced. In the said services, this vehicle got brand new tyres, exhaust and central heating system. In actual situation of the said vehicle was truly adverse. The same was 6 years old and was in a horrible condition. Although, Tasmin has informed to Kiran that she need this vehicle for her trip on weekend and Kiran has believed that the same cannot fulfill her purpose.  

Under Contract law, misstatement is a concept where one of the parties makes a false statement regarding law or fact, and the basis of this statement the other party of the transaction show his/her interest to enter into a contract. The lead purpose of misstatement is to induce another party to enter into the contract. Misstatement is a type/branch of misrepresentation. There are types of misrepresentation, such as innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation (e-lawresources (a), 2018). On the basis of kind of misrepresentation, remedies are defined to parties under Contract law. It was held in the case of  Bisset v Wilkinson [1927] AC 177 that merely opinion will not be considered as misstatement or misrepresentation, but in the provided case statement made by Kiran were not opinion and being the owner of motor home, she is believed to have full knowledge of true condition of the vehicle. So, it may state that, Kiran has made a fraudulent misrepresentation as she was aware with the actual condition of motor home, yet has told the opposite features to Tasmin. Further this is also important to mention that on the basis of these statements Tasmin has entered into contract with Kiran.

b. As earlier discussed in Question 12, Kiran has made a fraudulent misstatement while selling the motor home to Tasmin. Under the Contract Law, where one party induce other to enter into a contract on the basis of fraudulent misstatement, such contracts become void and have no legal bindings on the parties of the case. But there are some exceptions of this rule. According to the decision given in the case Attwood v Small[1838] UKHL J60, claimant will not be successful in his/her claim if he/she could have reason to get the true knowledge. In the mentioned case, claimant purchased an estate from the defendant. Defendant has informed to claimant that the subjective estate has potential to generate income. Claimant also made check the related accounts by his own accountant. Later on he taken an action against defendant stating that he has made misstatement but it was held that the claimant had reason to know the true condition of profitability. In the case of Redgrave v Hurd (1881) 20 Ch D 1, the claimant had reliance on the statement of defendant and therefore he was held entitled to rescind the contract. In the given case Tasmin had no liability to cross check the statement of Kiran and based on the statement of Kiran, Tasmin has entered into the contract.

Decision of the case Bisset v Wilkinson [1927] AC 177 is important to state as it was held that only opinion will not be consider as misstatement. In the given case, what Kiran has stated was not an opinion but a misstatement regarding the facts. In cases of negligent misrepresentation, the decision of the case Royscott Trust v Rogerson [1991] 2 QB 297 is important. It says that in such cases, damages will be granted to the claimant according to the provisions of tort law as negligent is more connected to tort law rather than contract law. It was held in the case of Doyle v Olby [1969] 2 QB 158    that in cases of fraudulent misrepresentation, the claimant can rescind the contract. Recession is a remedy that is available with innocent parties in the case of misrepresentation. This is a state where innocent party can terminate the contract.

In the studied case, Kiran and Tasmin have entered into a sell agreement, which was in writing. Although Kiran has made a misstatement to Tasmin about the working condition of motor home, yet she has procured various documents to Tasmin. Proving a misstatement fraudulent is a very typical thing to establish, therefore it is to assume that misstatement made by Kiran was of negligent nature.  In these documents, the actual age of motor home was written but Tasmin did not bother herself to check the same. However, it was irrelevant because the issue was with condition of vehicle not the age of the same. Sale document was not mentioned anything about actual condition of vehicle. Applying the provisions of Royscott Trust v Rogerson, Tasmin can ask for the damages for negligent misrepresentation done by Kiran.  Further, the impact of negligent misrepresentation will be similar to a fraudulent misrepresentation and Tasmin can rescind the contract.

c. Tasmin and Kiran were entered into a contract which was in writing. The said agreement was for the sale of motor home, registered in the name of Tasmin. In the said contract it was written that ‘On signing this contract the buyer accepts that Liability for any pre-contractual misrepresentation will be excluded”. It is very common in Contract Law to mention some exclusion clause in respect of Guarantee or warranty. But it is to mention that such exclusion cannot be if nature which overrules the basic requirements if a law.

It is general to state an exclusion clause in that contract where there is a risk involved and one of the party mention that the same will not be held liable for any kind of future mis-happenings. Parties to the contract introduced Such kind of clauses to safeguard their interest and to reduce their liability (e-lawresources (b), 2018). It was held in the case L'Estrange v Graucob [1934] 2 KB 394 that whenever a person signed a written contract, the same becomes liable to follow exclusion clause irrelevant to the fact that whether the same has read out the same or not. Further, it was stated in the decision of the case Curtis v Chemical Cleaning [1951] 1 KB 805 that exclusion case does not work in the cases of misstatement even when a person has signed the contract in which the said clause is mentioned. Further, decision given in the case Interfoto Picture Library v Stilletto [1989] QB 433 that where an exclusion clause or an important term is there, then it becomes liability of the person who want to take benefit out of it, to focus on that term. In the given case, Kiran has made an exclusion clause which will be invalid as the same exclude the liability of misstatement. This is not allowed in law and an exclusion clause which has a term relating to misrepresentation will not be effective. Further, applying the principles of Interfoto Picture Library v Stilletto, the exclusion clause was not incorporated in the contract in actual as Kiran has not done anything further to bring that exclusion clause in the notice of Tasmin. So, as asked in the problem scenario that what will be legal position of the exclusion clause, so it may conclude as the same will be invalid and Kiran cannot take the plea of the same.

Reference

Attwood v Small [1838] UKHL J60

Bisset v Wilkinson [1927] AC 177

Chappell v Nestle [1960] AC 87 

Curtis v Chemical Cleaning [1951] 1 KB 805

Doyle v Olby [1969] 2 QB 158

e-lawresources (a). (2018) Misrepresentation.   [online] Available from: https://e-lawresources.co.uk/Misrepresentation.php [Accessed on 26/06/18]

e-lawresources (b). (2018). Unfair terms. [online] Available from: https://e-lawresources.co.uk/Unfair-terms---regulation-by-common-law.php [Accessed on 26/06/18]

Felthouse v Bindley (1862) EWHC CP J 35

Findlaw. (2018) What is 'Consideration' and How Much is Required? [online] Available from: https://smallbusiness.findlaw.com/business-contracts-forms/what-is-consideration-and-how-much-is-required.htm [Accessed on 26/06/18]

Great Peace Shipping v Tsavliris International [2003] QB 679

Interfoto Picture Library v Stilletto [1989] QB 433

jifkins, J. (2017) Contracts don’t have to be in Writing to make them Binding. [online] Available from: https://onyxonlinelaw.com/contracts-dont-have-to-be-in-writing/ [Accessed on 26/06/18]

Kudrat. (2015) Termination of Agency under Contract Act. [online] Available from: https://www.lawctopus.com/academike/termination-of-agency-under-contract-act/ [Accessed on 26/06/18]

Laws of Business. (2018) Mistake in Contract. [online] Available from: https://www.lawsofbusiness.com/2013/08/mistake-in-contract.html [Accessed on 26/06/18]

L'Estrange v Graucob [1934] 2 KB 394

Lexinter. (2018) Counter offers. [online] Available from: https://www.lexinter.net/LOTWVers4/counter_offers.htm [Accessed on 26/06/18]

McKendrick, E. (2017) Contract Law. London : Palgrave, 2017

Out-Law.com. (2018) Formation of contracts. [online] Available from: https://www.out-law.com/page-396 [Accessed on 26/06/18]

Parker v South Eastern Railway (1877) 2 CPD 416

Pettigrew, J. M. (2012) Contracts: verbal vs written. [online] Available from: https://www.independent.co.uk/student/young-entrepreneurs/contracts-verbal-vs-written-6297966.html [Accessed on 26/06/18]

Raffles v Wichelhaus (1864) 2 H & C 906

Raffles v Wichelhaus (1864) 2 Hurl & C 906]

Redgrave v Hurd (1881) 20 Ch D 1

Sehgal, S. (2018) 10 Essential Elements of a Valid Contract in Business Law. [online] Available from: https://www.shareyouressays.com/knowledge/10-essential-elements-of-a-valid-contract-in-business-law/94753 [Accessed on 26/06/18]

Smith v Hughes (1871) LR 6 QB 597

Tepper, P. (2014) The Law of Contracts and the Uniform Commercial Code. Boston, MA : Cengage Learning.

The Lawyers & Jurists. (2018) Consideration Must Be Sufficient But Need Not Be Adequate-Illustrate And Explain. [online] Available from: https://www.lawyersnjurists.com/article/consideration-must-be-sufficient-but-need-not-be-adequate-illustrate-and-explain/ [Accessed on 26/06/18]


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