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Question:

Advice Joseph and Clara of their legal rights and obligations, and the likelihood of a successful action being brought by either Peter or Richard.
 
 

Answer:

Contract law, as the name suggests, is a law surrounding the contracts and is covered under the common law. In the following parts, the aspects of contract formation have been discussed, along with the frustration of contract and this has been done with reference to the case study given. After the application of the different aspects of the contract law in this case, it has been established that a claim by Richard would be successful against Clara and Joseph. And it would also be established that a claim against Richard would also not be successful.

To best state the definition of contract, reference has to be made to such a promise, which is undertaken between two or a higher number of parties, for doing something, in exchange for consideration[1]. For a contract to have legal binding qualities, it needs to have the basics of offer, acceptance, consideration, consent, capacity, legality of objects and intent[2].

The contract starts when an offer is made by party A to party B. There is a need to clearly distinguish between an invitation to treat and an offer. The former shows the interest of the parties and the need to initiate the negotiations of the contract and the latter denotes an intention to form lawful relation[3]. For instance, the magazine or the newspaper adverts are invitation to treat and not an offer. A leading example is Partridge v Crittenden[4] it was held that the magazine advert was an invitation to treat. And in such cases, even when he adverts is a selling advert; the person is not bounded to sell the product. Though, if the wordings of the advert are such that a unilateral offer is presented, it is deemed as an offer, as was held in Carlill v Carbolic Smoke Ball Company[5].

 


In the given case study, an advert was given by Joseph in the newspaper and this would be deemed as an invitation to treat as the option of further negotiations was open here, in the manner of invitation of prices. The reason for holding this advert as an invitation to treat is that the quotes have been invited here; unlike an offer, where a clear price is contained for the promise being asked for, here, the price is uncertain. And it requires more communication to clear the exact offer. Hence, based on Partridge v Crittenden, Clara and Joseph were not under the compulsion of accepting the communication sent by Richard or Peter. The communication sent on 8th April 2017 by Richard and that of Peter’s 12th April 2017 would be considered as offer.

The next step in contract formation is acceptance of offer which has been made. The acceptance has to be given by the person to whom the offer had been made and it has to be given to the offer which was made[6]. If, while communicating this acceptance, the terms are modified, it would be considered as a counter offer, as was held in Hyde v. Wrench[7]. The date of acceptance is deemed as the date on which the communication of acceptance reaches the party which made the offer. However, an exception to this rule is the postal rules of acceptance. As per these rules, the date of posting the letter is considered as the acceptance date[8]. This is due to the notion that the postal office is the implied agent of the offering party and the receipt by the postal office is considered as the receipt by the offering party. And the delivery date of such communication remains irrelevant[9]. Adams v. Lindsell[10] was a case where this principle resulted in the enforceability of the contract. The postal rules of acceptance are also applicable on email communication and this is true for both offer and acceptance[11].

In the given case study, the offer had been sent through the email. Hence, on the basis of the postal rules, the email date is the offer date. Richard made an offer to Joseph through email on 13th April and this would be the date of offer based on postal rules. The offer was immediately accepted and so, the date of acceptance would be 13th April, 2017. Another crucial element in a contract is consideration, the absence of which renders the contract invalid[12]. In the given case study, the consideration for Richard was $40 per square meter.

Peter emailed on 12th April that he wanted to do the work at a price of $38 per square meter. This communication was not given any response. The date of offer on the basis of postal rules would be 12th April. However, the offer of Peter was not accepted earlier and instead, the offer of higher rate, made by Richard was accepted. The consideration was $38 per square meter, based on the offer made by them through their respective emails.

 


The contractual terms were very clear and it is assumed that there was consent and capacity present between the parties, as nothing suggests otherwise. There was no illegality in the contractual terms[13]. Hence owing to the presence of requisite elements of a contract, a legally binding contract was formed with Richard; however, the same was not done with peter owing to the lack of acceptance. The lack of acceptance for Peter can be derived from the case of Powell v. Lee[14], where it was obligated that the acceptance be communicated. Peter was given no such communication where the acceptance could have been deemed as accepted. And so, it is clear that due to the absence of proper acceptance, the contract would not be formed as it is a crucial element of contract.

The exclusion clause in the contracts is one clause which can restrict and limit the liabilities of the party inserting it[15]. The exclusion clause, in the case study given here, was present in the standard form given by Richard, instead of the main contract. As this was not brought to the attention of Joseph, it would be invalid, as per Chapelton v Barry UDC[16]. However, the exclusion clause is not of much use in this case. This is due to the actions undertaken by Joseph which stopped Richard from continuing his work. This clause would be helpful if Joseph makes a claim against Richard for the collapse of the floor. Though, the invalidity of the exclusion clause would result in this claim being made unsuccessful.

 


The given case study highlights that Richard could not complete his work owing to the actions of Joseph. So, even when Richard was the one who did not finish his part of obligation under the contract, the breach of contract would be on part of Joseph. This is because he was deliberately stopped from discharging his part of the obligation. If one of the parties deliberately stops the other party from performing their promise, they cannot cite a breach on the part of the party who has been stopped from working. Moreover, this behavior of Joseph would be deemed as a breach of contract as he was under an obligation to let Richard do his part of the contract. Joseph is the one who breached the promise made under the contract by stopping Richard and not the other way round. And owing to the actions of Joseph, Richard can apply for monetary compensation for the ensuing breach of contract. However, the same cannot be done by Peter owing to an absence of contract between them. 

Once the incident took place, Joseph contacted Peter for his offer and changed the terms. On the basis of Hyde v. Wrench, this communication would be deemed as a counter offer. The contract which was formed here afterwards had the work still as incomplete, as Peter did not start any work. As the contract was not concluded in this case, the contract cannot be discharged yet.

Clara and Joseph could have made a counter claim only when Richard had been at fault in discharging his obligations. Even though a claim can be made for improper work, resulting in flooding, there was no refusal on part of Richard to fix the issue or to finish the work. The actions of Clara and Joseph resulted in a deliberate discharge of contract, and hence, not only would they be liable, but would also get no counter claims. When one part is ready to undertake their part of the promise but the other party does not accept it, the party which seeks to perform the contract is discharged from the contract and the party which is not ready to accept the performance is liable for the damages[17]. For this, the case of Startup v MacDonald[18]  proves helpful. Due to these reasons, Clara and Joseph would be liable for the damages due to non-acceptance. And for this, they cannot make a claim against Richard owing to their non-acceptance.

 


To conclude the entire discussion, Clara and Joseph would not be successful in their actions against Richard as their actions led to a discharge of contract by breach. And the invalidity of exclusion clause does not play any role for Richard, owing to the fault of Clara and Joseph. Had it been Richard’s fault, and had the exclusion clause been valid, it would have helped Richard in evading his liability. But, as neither the exclusion clause was valid, nor it was Richard’s fault (as Clara and Joseph had stopped him, resulting in breach on their party), the exclusion clause does not hold any key role. Lastly, there is no liability of Clara and Joseph with the contract which was formed with Peter, as this contract was formed after the whole incident with Richard took place and does not have any aspect of performance or breach in the question after the occurrence of incident between Richard and Joseph-Clara. Hence, it is advisable to Clara and Joseph that they should refrain from raising an issue against Richard as it was their fault in stopping Richard from finishing his work. And even though they have signed the exclusion clause, it would not result in change in their position. And since, the contract has not yet been concluded Clara and Joseph should refrain from raising any issue against him.

 

Bibliography

Abbott K, Pendlebury N, and Wardman K, Business law (Thompson Learning, 8th ed, 2007)

Andrews N, Contract Law (Cambridge University Press, 2nd ed, 2015)

Carter JW, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007)

Davies PS, JC Smith's the Law of Contract (Oxford University Press, 2016)

Elliott C, and Quinn F, Contract Law (Pearson Education Limited, 9th ed, 2013)

Furmston M, and Tolhurst GJ, Contract Formation: Law and Practice (Oxford University Press, 2010)

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)

McKendrick, E Contract Law (Pearson Education Limited, 11th ed, 2015)

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

Partridge v Crittenden [1968] 1 WLR 1204

Powell v. Lee (1908) 99 L.T. 284

Startup v MacDonald (1843) 6 Mann & G 593

Contract Law

E-Law Resources, Discharge through performance (2017) <https://e-lawresources.co.uk/Discharge-through-performance.php

Elizabeth Macdonald and ‎Ruth Atkins, Koffman & Macdonald's Law of Contract (Oxford University Press, 8th ed, 2014)

John W. Carter, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007)

Keith Abbott, Norman Pendlebury and Kevin Wardman, Business law (Thompson Learning, 8th ed, 2007)

[1968] 1 WLR 1204

[1893] 1 QB 256

Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)

(1840) 3 Beav 334

Neil Andrews, Contract Law (Cambridge University Press, 2nd ed, 2015)

Ewan McKendrick, Contract Law (Pearson Education Limited, 11th ed, 2015)

(1818) 106 ER 250

Catherine Elliott and Frances Quinn, Contract Law (Pearson Education  Limited, 9th ed, 2013)

Michael Furmston and G.J. Tolhurst, Contract Formation: Law and Practice (Oxford University Press, 2010)

Paul S Davies, JC Smith's the Law of Contract (Oxford University Press, 2016)

(1908) 99 L.T. 284

Richard G. Lawson, Exclusion Clauses and Unfair Contract Terms (Sweet & Maxwell, 10th ed, 2011)

(1940) 1 KB 532

E-Law Resources, Discharge through performance (2017) <https://e-lawresources.co.uk/Discharge-through-performance.php>

(1843) 6 Mann & G 593

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