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Case Issues: Advice from legal authority

Question 1 (13 marks) (1100 words limit no less but can exceeds )

In a letter, dated 1 March and posted the same day Ann wrote to Jack offering to sell him her car for $12,000. She wrote,” I will give you until 7 March to make up your mind”. However, soon after posting the letter Ann changed her mind and on the morning of 2 March posted Jack a second letter advising him that the car was no longer for sale. 

Jack received Ann’s first letter at 10.00 am on 3 March. At 2.00 pm on the same day, Jack posted the following reply to Ann: 

‘I like your offer very much but due to my present financial position will you accept payment of $1000 per month over a year? 

This letter reached Ann on the morning of 4 March. 

On the afternoon of 4 March Jack received an unexpected cheque for $16,000 from his uncle, and at 4.00pm he posted a second letter to Ann which said: 

‘Forget my last letter; I accept your offer made in your letter dated 1 March and can pay you immediately I receive the car’. 

An hour after posting that letter Jack received Ann’s second letter advising that the car was no longer for sale. 

On 5 March, Ann received Jack’s second letter. 

Ann seeks your advice on whether there is a contract between her and Jack. 

In your answer, you are required to refer to relevant legal authority 

Question 2 (1100 words limit no less but can exceeds) 

Batty was driving to work in his car when his car broke down. He telephoned his local garage, Qualal Motors, and told them of his difficulty. They agreed to send out a mechanic, Eddie, to repair the car. 

When Eddie checked the car he discovered that it could not be repaired at the roadside but would have to be towed to the garage. Batty agreed to this. 

Eddie winched up the car on to the towing vehicle for the purpose of towing it to the garage. However, a worn clip on the towing gear being used by Eddie slipped open causing the car to fall. The car ran backwards over Batty’s foot breaking several of his toes. Also, the car’s suspension was severely damaged in the fall. 

Displayed on the back of the towing vehicle was a notice: 

“All towing is undertaken at the customer’s risk. Qualal Motors and their employees accept no liability for any damage, injury, or consequential loss, howsoever caused, while a car is being towed.” 

Batty wrote to Qualal Motors claiming compensation for the injury to his foot and for the cost of repairing the damage to his car’s suspension. They rejected his claim and referred him to the notice on the towing vehicle and to a similar notice that was displayed in their garage. 

Advise Batty of any legal rights he may have against Qualal Motors to obtain compensation for his injury and the damage to his car. 

You are required to consider only the legal position at common law. 

In your answer, you are required to refer to relevant legal authority.

Answer

Question one

Issue: The issue in this assignment is if a valid contract has been created between Ann and Jack. It also needs to be seen if Ann is bound by the promise according to which he had agreed to keep the offer open until 7 March. Issues related with offer and acceptance under the contract law and the issue of counteroffer also needs to be discussed.

Rule: The analysis of offer and acceptance is traditionally used under the contract law for deciding if a valid contract has been created between the parties or not. A contract is considered to be formed when the acceptance of the offer is communicated to the other party. 

An offer can be described as the willingness of their party to enter the contract on particular terms. Therefore an offer is made by the party with the intention that it will become binding when it is accepted by the party to whom it was made, the offeree. A contract can be a unilateral contract or a bilateral contract (Australian Woollen Mills Pty Ltd v The Commonwealth, 1954). Similarly an offer also needs to be distinguished from invitations to treat. An invitation to treat only indicates the willingness of the person to negotiating terms of the contract. In Harvey v Facey, the indication given by the owner of the property that he is willing to sell the property at a particular price was considered as an invitation to treat. An offer can be invoked at any time before it has been accepted by the other party. However, it is necessary to communicate the revocation of the offer to such party. When the offer has been made to the whole world, like in Carlill v Carbolic Smoke Ball Co. (1892), the revocation may take place in the same form as the offer. 

Acceptance can be described as the unqualified acceptance of the terms of the offer. The acceptance of the offer needs to be communicated to the offeror (Entorres v Miles Far East1955). Similarly, the acceptance should be the mirror image of the offer. Therefore, in other words, the offer needs to be accepted exactly on the same terms, without any modification. In case any changes are made in the terms mentioned in the offer, it amounts to a counter offer (Hyde v Wrench, 1840). The effect of making a counteroffer is that the original offer is no longer available. However, only a request for further information cannot be treated as a counteroffer. 

Another relevant to this regard is the postal acceptance rule. This is a rule of convenience. According to this rule, when the offer has been accepted by post, the law of contract provides that a valid contract is created between the parties as soon as the letter containing acceptance was posted. However, this rule is applicable only when post has been contemplative as the means of conveying acceptance (Adams v Lindsell, 1818). 

The contract law also provides that when the party making the offer has promised to keep the offer hope for a particular time, such promise can be enforced against the party only if it is supported by some valid consideration. The leading authority in this regard is Dickinson v Dodds (1876). In this case an offer was made by the defendant to sell his house to the claimant. The defendant also promised that the offer will remain open until Friday. However on Thursday, a third-party made an offer to purchase the house and it was accepted by the defendant. Then the defendant asked his friend to inform the claimed that the offer has been withdrawn. However after coming to know, the claimant went to the defendant with a view to accept the offer. Under these circumstances, the claimant started action in the court seeking specific performance of the contract.

However, the court stated that the offer had been revoked effectively. As a result there was no contract between the parties. It was not obligatory for the defendant to keep the offer open until Friday. The reason given by the court was that no consideration has been supplied by the claimant in return of the promise. Under these circumstances, the offeror is free to withdraw the offer before it has been accepted by the other party.

Application:  After going through the facts given in this question, it becomes clear that Ann was not bound to keep the offer open until 7 March. The reason is that Jack had not applied any consideration in return of the promise made by Ann according to which the offer was going to remain open until 7 March. Similarly, the first letter written by Ann was received by Jack on 3 March, 10 AM. On the same day, at 2 PM Jack had posted a reply in which he had mentioned that as a result of his financial position, he can pay $1000 for a year as the price of the car. This letter was received by Ann on the morning of 4 March. Due to the reason that in the center, Jack had introduced completely new terms, the latter amounts to a counter offer. As a counter offer has been made by Jack, the original offer made by Ann was no longer available to Jack. On the afternoon of 4 March, Jack received some money from his uncle and therefore he wrote to Ann on the same evening that he was willing to accept the offer made by Ann in a letter written on 1 March. However, Jack comes to know that the car was not available for sale in the more. 

It needs to be mentioned that as a counter offer has been made by Jack, he cannot accept the original offer later on. Moreover, the postal rule is also not applicable in the present case. Under these circumstances, it can be stated that Ann could have revoked the offer any time, although she had promised to keep the offer open until 7 March. The first letter written by Jack is a counter-offer. As a result Jack cannot accept the offers made by Ann in her first letter. The postal rule of acceptance is also not applicable in this case. When the second letter containing the acceptance of the offer was posted by Jack, the offer has been already revoked due to the counteroffer made by Jack in his earlier letter.

Conclusion: Under the circumstances, it can be stated that a valid contract has not been created between Jack and Ann regarding the sale of the car. 

Question two

Issue: the issue in the present case is related with the application of the exclusion clause that has been mentioned on the back of the towing vehicle. And according to which, Qualal Motors cannot be held liable for any damage, injury or loss. 

An exclusion clause is also known as an exemption clause and it is a term present in the contract that has been included by one party with a view to exclude its liability or limit the liability of such party in certain conditions, situations or circumstances. An exclusion clause can be included in the contract with a view to limit or exclude the liability of one party in case of breach of contract or negligence. The law provides that such party can rely on the exclusion clause only if:

  • The clause has been properly incorporated in the contract; and
  • The clause covers the loss in question;
  • The clause should also be according to the provisions of Unfair Contract Terms Act, 1977. 

Therefore, a party may rely on the exclusion clause only if the clause has been properly incorporated in the contract. In this regard, the law provides that an exclusion clause can be considered to be a part of the contract in the following three ways:

  • By signature
  • By notice
  • By course of dealing.

The law provides that when a contractual document has been signed by the plaintiff, which also contains an exclusion clause, it will be considered as a part of the contract and such party will be treated as being bound by the terms. In such cases it does not matter if the party has not read the document or he did not understand the contract (L'Estrange V Graucob, 1934). However, such party will not be considered as being bound by the exclusion clause if the other party has made an oral misrepresentation concerning the effect of such clause (Curtis V Chemical Cleaning Co., 1951).

An exclusion clause can be present in an unsigned document like a ticket or a notice. However, the law requires that in such cases, sufficient and reasonable notice regarding the presence of the exclusion clause should be given to the other party. Such laws will not be imposed by the court unless the party affected by such clause was really aware of the presence of the clause or if sufficient notice regarding the presence of such clause has been given to such party. For the purpose of dealing with the inadequacy of notice, it should be present in the contractual document instead of any other document acknowledging the payment, for example, a receipt. The inclusion of such clause should be brought to the notice of the other party before or while entering into the contract.

In Thornton V Shoe Lane Parking (1971), the defendant was the owner of a car park. The plaintiff was given a ticket by automatic machine. It was mentioned on the ticket that the contract was subject to the conditions that have been displayed in the car park. However these conditions were mentioned in small print. One of these conditions stated that the owner of the car park cannot be held liable for damage to the vehicle or injury caused to the customers. The plaintiff suffered an injury, partly due to the negligence of the defendant. It was held that the rent it was not bound by the terms mentioned on the notice which was displayed inside the premises. The reasoning of the court was that the clause was so wide and harmful for the rights of the customers that in order to give sufficient notice, the clause should have been mentioned in red ink or a red hand pointing towards it on something equally noticeable. 

Similarly in Olley V Marlborough Court (1949), the plaintiff was staying at the defendant's hotel. A stranger came to her room and stole a mink coat. A notice has been placed on the back of door of the room. It was mentioned that the defendants cannot be held liable for any articles stolen or lost, unless they have been given to the manager for safe custody. It was the opinion of the court of appeals that this notice was not a part of the contract concluded between the owners of the voter and the guest. While the contract was concluded between the parties in the hall, before the plaintiff entered the room. As a result, the printed did not have the chance to see the notice before entering the contract. 

Application: In the present case, Batty sought help from Qualal Motors, who sent their mechanic Eddie to repair the car. However, Eddie found that the car could not be repaired on the roadside and therefore it had to be towed to the garage. But as a result of a worn clip on the towing gear that Eddie was using, the car fell, and it ran backwards breaking several of Batty's toes. The suspension of the car also suffered severe damage as a result of the fall. However, when Batty, tried to claim compensation from Qualal Motors, they pointed out towards a notice mentioned on the back of the towing vehicle. According to this notice, Qualal Motors cannot be held liable for any injury, damage or loss caused while towing a car. Therefore, Qualal Motors was trying to evade their liability on account of this notice and also a similar notice that had been displayed in the garage. 

But as mentioned above, such exclusion clause needs to be properly included in the contract. Such a clause could have been included in the contract completed between the parties by signature, by notice or by course of dealing. In the present case, Batty had not signed any contract. Moreover, there were no previous dealings between the parties. Therefore Qualal Motors is trying to rely on the notice that has been mentioned at the back of the towing vehicle. But such a clause can be considered as a part of the contract only. It has been brought to the notice of Batty before or while entering the contract. 

However, this was not the case and as a result, it can be stated that in this question, the notice mentioned on the towing vehicle cannot be treated as a part of the contract concluded between the parties.

Conclusion: By applying the law mentioned above, it can be concluded in this question that Qualal Motors cannot rely on the student clause that was present on the back of their towing vehicle. Consequently, Batty can claim compensation for the injury suffered by and also for the damage that was caused to his car.


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