BLST2BSL Introduction To Business Law And Ethics

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04-10-2021

Questions:

Mikaela uses the almond flour to bake a cake for the wedding of Dan and Jacob. Dan, who has coeliac disease, has a severe reaction to the cake. It turns out that the almond flour used in the cake was not gluten-free, as it had been processed and packaged with machinery also used for wheat flour.

Dan and Jacob had not specifically requested a gluten-free cake when dealing with Mikaela, but they had asked for almond flour. They now want to sue her for breach of contract.

Was it a term of the contract between Mikaela and Tower Flours that the almond flour would be gluten free?
Was there an implied term in Dan and Jacob’s contract with Mikaela, that their wedding cake would be gluten-free?

After the complaint about Dan and Jacob’s cake, Mikaela makes a sign to put up in her cake shop. She positions the sign on the wall next to the counter where customers are served. Kimiko comes to Mikaela’s shop to place an order for a cake. They discuss all of the details: Kimiko orders a round, chocolate cake covered with blue and purple coloured icing. While finalising the order Kimiko sees the sign, which says: We accept no responsibility for breach of any warranty. Kimiko comes back a week later to collect and pay for the cake. After leaving with the cake Kimiko discovers that it has blue and green icing. This makes it inappropriate for the function she was planning to use it for – a sports team celebration. Kimiko wants to complain to Mikaela but isn’t sure whether or not the sign prevents her from doing so.

Was the icing colour a condition or a warranty of the contract?
Is Mikaela still responsible for the icing being the wrong colour on Kimiko’s cake?

Answers:

Question 1

Issue

The central issue is to determine whether the gluten free almond flour is considered to be a term for the enacted contract or not.

Rule

When the two parties’ i.e. offeror and offeree are negotiating the enactment of contract, then the statements represented by the parties in this pre-contractual stage would be called as terms of the contract. Terms is considered to be an essential part of contract because the decision of forming a contract depends on accuracy of these statements. Importance of terms can be viewed from the fact that if the statement (term) which was cited by one party to another serves as basis for enacting a contact and it is found to be incorrect, then in such cases the innocent party has the right to go back to pre-contractual stage and to sue the other party for breaching the underlying term[1]. In such cases, the innocent party can recover the damages. Hence, it is pivotal to determine that in which cases the statement would be classified as term for the contract.

Imperativeness of statement

When the decision of enacting a contract is based on the correctness of the cited statement, then it would be considered as term of contract. The testimony in this regards is highlighted in the Bannerman v White[2] case.

Timing

When the time lag between stating the statement by one party and decision making regarding enacting the contract of another party is very minimal, then in such cases the statement would be categorized as a term. This is evident from the decision announced in Routledge v McKay[3] case.

Competency/ requisite knowledge of party

According to the judgment of Harling v Eddy[4] case, it has been found that the party must be enough capable to check the accuracy of the statement. This is also evident from Oscar Chess v Williams[5] case.

Form of the statement

The honorable court would take a note of whether the statement is extended through oral or written mode. It is because, in case of written form, the statements which are not mentioned in the written form would not be considered as terms. The decision in the Birch v Paramount[6] Estates case is the testimony of this.

Application

It is apparent from the case facts that Mikaela is running a cake shop and purchases the necessary ingredients from Tower Flours.

Mikaela wanted to purchase gluten free almond flour from Tower Flour. Rickey the representative of Tower Flours was discussing with Mikaela and said that their almond flour is gluten free. Mikaela agreed to purchase 40kg of almond flour from them. It is fair to conclude that gluten free nature of almond flour is term for the contract based on the below highlighted facts:

Mikaela specifically asked for gluten free almond flour (Imperativeness of statement)
Mikaela enacted the contract with Tower Flours when she got to know through Rickey that their flour is gluten free (Limited/minimal timing gap)
When Mikaela asked for gluten free almond flour from Tower Flour, they are having requisite knowledge to check whether their flour is gluten free or not. (Competency of party to find accuracy of statement)

It can be said that gluten free almond flour is pivotal for Mikaela and she would not order 40kg flour from Tower Flours if their flour is not gluten free. Further, she will not enact contract with Tower flours if this term is not present.

Conclusion

It can be concluded that gluten free nature of almond flour is considered to be term of contract enacted between Mikaela and Tower Flour.

Question 2

Issue

The issue is to determine whether gluten free cake would be considered as implied term for the Dan and Jacob’s contract enacted with Mikaela or not.

Rule

The terms which are not express or highlighted in the contract would be called implied terms. These terms are assumed to be silently present in the contract and it has been understood that both the parties are aware of these terms coupled with mutual agreement. Mutual details or information are not specified at the time of enacting contract but underlying relationship between the parties is the key parameter to assume that these are present in the contract. In other words, the terms which is mainly understood and essential aspect of creating contract then it would be called implied terms as per common law stipulation[7]. These kinds of terms are more observed in the commercial business transaction contract, where the parties are mutually agreed with the implied terms. The pre-requisite is that they should perform their respective contractual duties without harming rights of another party. The decision in the Liverpool City Council v Irwin[8] case is the witness of this aspect[9].

Application

It is apparent that Dan and Jacob did not mention about the almond flour bring gluten free and just mentioned that the cake must contain almond flour. Also, based on the information provided, they did not tell Mikaela about the disease and the possible implications of using flour containing gluten. Hence, when Dan and Jacob ordered wedding cake from Mikaela, it can be assumed that she was not aware about the cake to be made using gluten free almond flour. Hence, it would not be called implied term of the contract as one party did not know about the term and hence did not extend agreement about the same.

Conclusion

Based on the above discussion, it can be said that gluten free cake is not an implied term for the given enacted contract.

Question 3

Issue

The issue is to comment whether cake icing color is a condition or a warranty of the contract.

Rule

Terms are categorized under condition or warranty. Term would be called as condition when the contract would not form if the term is not satisfied as highlighted in Poussard v Spiers[10] case. The innocent party can declare the contract void and recover the damages when a condition is breached. Warranty is not that much imperative for contract and thus, breach of warranty would not result in revocation of contract as evident from Bettini v Gye case[11]. However, the party can recover the damages from defaulting party.

Application

Kimiko asked for some specific icing color which was not provided when he went to receive the cake. Icing color is an important part of cake but it does not have high attribution for the cake and also, Kimiko accepted the cake with different icing color and hence, it can be said that icing color is warranty for the contract.

Conclusion

As per above, it can be concluded that icing color is warranty and not a condition.

Question 4

Issue

The issue is to find whether Mikaela is responsible for wrong icing color on Kimiko’s cake or not.

Rule

As per the decision extended in Bettini v Gye[12] case, breach of warranty would not lead to revocation of contract. However, the innocent party has the legal rights to claim for the damages from the defaulting party. However, the imperative aspect to note is that the service provider must inform the customer regarding the possibility of breach of warranty. This is known as exclusion clause. This would extend the freedom to the respective party to enter or not to enter into contractual relation[13]. This is essential even though the respective clause is highlighted and the customer can easily notice the same. Hence, this is the core responsibility of the service provider to inform the customer regarding exclusion clause[14].

Application

It is apparent that color icing is not as per the request of Kimiko and thus, breach of warranty has incurred in this case. Therefore, it can be said that Kimiko has the legal rights to recover the damages from Mikaela. This would be valid even though Kimiko read the breach of warranty clause highlighted in the shop as it is the responsible of Mikaela to bring the attention of Kimiko towards the sign of breach of warranty. Hence, Mikaela fails to complete their duty.

Conclusion

It can be concluded that Mikaela fails to complete her duty and thus, breach of warranty has incurred by placing wrong icing color. Hence, Kimiko has the rights to recover the damages from Mikaela.