Contractual Issues In Business Transactions: An Essay.

Case Scenario 1: Hiring Electronics from Electric Blues

Evelyn owns and runs an electronics hire business, Electric Blues. When Weitao hires a projector from Electric Blues, he is asked to sign a document containing the details of the projector and the duration for which he will be hiring it. At the bottom of the page there is a note in small print: “If any damage is caused to the item being hired, the customer is liable to pay a $1000 replacement fee.”

Weitao checks the details at the top of the document but doesn’t bother to read the smaller print at the bottom. He signs it and takes the projector home.

While using the projector Weitao accidentally scratches its casing. While returning the projector to the store the following week, he offers to pay to have the casing fixed. Evelyn insists that Weitao owes her $1000 to replace the entire projector.

1. Is Weitao bound by the note in small print about the $1000 replacement fee? 

Evelyn is carrying out some improvements to the layout and décor of her store. She hires Warren to paint the internal walls of the store. Warren accepts the job, but says that the painting will take a full day to complete, and then a full day to dry. Evelyn agrees.

Over the next five weeks, every time that Warren calls Evelyn to suggest a date for the painting, she says that she can’t close the store that week, due to important deliveries arriving or customer delays. She also refuses to suggest a future date for Warren to complete the painting.

Warren is upset. He complains that Evelyn is making it impossible for him to get the benefit of their contract, and that this is something all contractual parties must do.

2. Is Warren correct? 

Ambreena comes into the store and speaks with Evelyn. ‘I need a tablet that I can use to complete an important project while I am travelling overseas.’

‘No problem,’ says Evelyn. ‘This tablet here is nice and light, so good for travelling. In my view it also has a lot of storage space compared with most tablets nowadays.’

Ambreena rents the tablet to take overseas. When she tries to install the apps needed to complete her project, she finds that the storage space on the tablet is actually quite limited.

3. Is it a term of Ambreena’s hire agreement that the tablet has more storage space than most tablets on the market? (4 marks)

Jake comes to hire a laptop from Evelyn’s store. After choosing a laptop, filling out the paperwork, and taking the laptop home, Jake realises that there is no charger cable in the laptop bag. He calls the store and speaks to Evelyn.

‘Well, you never said you needed a charger as well,’ says Evelyn. ‘It will cost you extra if you want to hire the charger too.’

Jake says that he never thought to ask for the charger, as he assumed it would be included.

4. Is there an implied term in Jake’s hire agreement, that a charger will be provided with the laptop being hired? 

The key issue raised in this case is whether Weitao is liable to pay the replacement fee to Evelyn as per the terms of the contract signed by him?

An exclusion clause is referred to a term which is included by the parties to a contract in order to avoid their liability which is raised in case of breach of the contractual terms. These terms are used by parties to avoid paying compensation or damages to another party by eliminating their liability. While including an exclusion clause, the parties have to comply with the general rule of exclusion clause. The rule provides that the term must bring into the notice of the party while forming the contract. In Chapelton v Barry UDC case, a receipt was given to the claimant, and the exclusion clause was included in the receipt.

The claimant suffered an injury and filed a claim against the defendant; the defendant wanted to rely on the exclusion clause to eliminate the liability. The court provided that the receipt received by the party was not considered as a contract based on which the exclusion clause is not valid. Moreover, the court provided in Olley v Marlborough Court case that the exclusion clause must bring into the attention of the party before the formation of the contract or during its formation. There is an exception to this rule which provides that in case the term is included in a written contract, then the exclusion clause is not required to bring into the attention of another party as provided by the court in L’Estrange v Graucob case.

While hiring the projector from Evelyn, Weitao signed a document in which the exclusion clause was contained. As per the clause, Evelyn terminated her liability to pay for compensation in case the customers damage the product. Evelyn did not comply with the general rule of including the exclusion clause since it was not brought into the attention of Weitao (Chapelton v Barry UDC). However, a written contract has formed between the parties based on which the general rule did not apply, and the exclusion clause is valid (L’Estrange v Graucob).

C: Conclusion

To conclude, Weitao is liable to pay the replacement fee to Evelyn as per the terms of the contract.

The key issue raised is whether Warren has the right to discharge the contract?

A contract which is formed between parties can be discharged based on certain elements. After discharging the contract, the parties are removed from their legal obligations which rose under the contract. A contract can be discharged by breach of terms, frustration, agreement, and performance. While discharging a contract based on performance, the parties have the right to rescind their contract in case a contracting party declines the performance of the contract. If the performance of a contract is declined by a party, then another party has the right to rescind the contract. In the case of Planche v Colburn, the contract was rescinded based on the decline of performance and the court awarded the compensation to the claimant. The claimant was hired by the defendant to write a book, however, the defendant cancelled the book series and declined to pay the claimant for the work performed by him. The court provided that the contract is discharged based on the decline of performance by the defendant and the claimant is liable for compensation.

Case Scenario 2: Contract Discharge for Painting Services

Evelyn entered into a contract with Warren in order to improve the layout of her store and its décor. Warren told Evelyn that it would take two days to complete the whole work; however, Evelyn keeps declining the performance whenever Warren wanted to complete the job. Since Evelyn is not letting Warren gets the benefit of the contract by complying with its terms, the contract can be discharged by him based on decline of performance by Evelyn (Planche v Colburn). Warren can also claim compensation from Evelyn as well for not letting him get the benefit of the contract.

C: Conclusion

To conclude, Warren has the right to discharge the contract since Evelyn is declining the performance.

The key issue raised is whether Ambreena can hold Evelyn liable for misrepresentation even though she did not specifically ask for the storage of the tablet?

A misrepresentation is referred to a false statement which is made by a party with an objective to induce another party to form a contractual relationship with them. During the negotiation stage of a contract, any false statement or representations made by a party in order to constitute the contract are considered as misrepresentations which are made by the party. In case a false statement is made by the party to form a contract, then such contract will be considered as voidable. Since the contract becomes voidable, the innocent party has the right to set aside the contractual obligations and held the breaching party liable for violation of the contract as provided by the court in Esso Petroleum v Mardon[7] case. A misrepresentation is separate from the personal opinion of the party since a party cannot be held liable for providing a personal opinion which is false. However, the court provided in Smith v Land & House Property Corp case that if the person is in the position to know the true facts, then the statements will not be considered as personal opinion. In this case, the seller told the claimant that the tenant is ‘most desirable’ whereas he was on the verge of bankruptcy. The court provided that the seller was in the position to know the true facts, thus, it was considered as misrepresentation.

During the negotiation stage of the contract, Evelyn told Ambreena that the tablet has enough storage to install many applications. The statement was made by Evelyn to induce Ambreena to sign a contract which is considered as misrepresentation (Esso Petroleum v Mardon). Moreover, Evelyn is in the position to know the true facts since she is the owner of the shop based on which she cannot provide that the statement was her personal opinion (Smith v Land & House Property Corp). Therefore, Ambreena can hold Evelyn liable for making misrepresentation to him.

C: Conclusion

To conclude, Ambreena can hold Evelyn liable for misrepresentation even though she did not specifically ask for the storage of the tablet.

The key issue raised is whether giving the charger with the laptop is an implied term of the contract?

The terms of a contract are divided into two parts which include expressed and implied terms. The expressed terms are included in the contract by the parties while forming the contract. On the other hand, the implied terms are included in a contract by the court or the statute. As per the provisions gave under the common law, the court has the right to include the implied terms in a contract based on the facts, custom or law. While establishing the implied terms based on customs, the court evaluates whether a particular term is prevalent in trading practices. The court analyses similar contracts while determining whether a term is implied in the contract. The court used this rule in Hutton v Warren case while providing its judgement. In this case, a farmer was hired by the defendant for ensuring that its crops would grow properly. The claimant gave a bill to the defendant for the work and the price paid for the cost of purchasing seeds. The defendant declined to pay by providing that it is not included in terms of the contract. The court provided that it is customary in farming tenancies that the amount for seeds and work is given by the party, thus, the defendant is liable to pay the money to the claimant.

While purchasing the laptop, Jake found out that Evelyn has not included the charger along with the laptop. Evelyn wanted Jake to pay extra money for the charger. However, a charger is included with the laptop which is considered as a custom. The customs of trade practices are considered as implied terms based on which including the charger with the laptop is customary for businesses, therefore, Jake can demand the charge from Evelyn without paying any extra charges (Hutton v Warren).

C: Conclusion

To conclude, including the charger with the laptop is considered as an implied term of the contract based on the customs of the trade, therefore, Evelyn has to give the charger to Jake without imposing extra costs.