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Issue

(a) Louis is the owner of a small service counter providing shoes repairing service. On 1st December, Louis visited Wonderful Supplier (‘Wonderful’) which is a very large supplier selling machines for repairing shoes. .Wonderful is one of the three suppliers of machines for repairing shoes in Hong Kong. The price of the machines sold by Wonderful was the lowest one among the three suppliers and Wonderful gave twenty percent discount on the purchase price to any order made on or before 3rd December. Benjamin, the owner of Wonderful, gave an order form to Louis to sign after Louis told him that he wanted a machine for repairing shoes.

The form was in English and has a clause in small font size: “Our shop would not be responsible for whatsoever loss suffered by our customer. No refund will be allowed for any goods purchased by customer.’ Louis then signed the form without asking Benjamin any question. Louis had only received primary education and did not know any English. Benjamin was not aware of the fact that Louis did not know English.

Louis was delivered the machines on 5th December as agreed between him and Benjamin. There was a receipt served to him together with the machines saying, in large Chinese characters, that Wonderful would not be responsible for any loss suffered by its customers due to any breach of contract and there would be no refund for any goods purchased by customer. He was told by Amy, a worker of Wonderful who delivered the machines to Louis on behalf of Wonderful to sign this document. Louis signed the receipt as told after reading the above clause in Chinese.

Louis found on the same day that the machine did not function well. He took the machine to Wonderful and requested refund of the money he had paid. Benjamin drew his attention to the clause in the receipt arguing that there would be no refund.

Discuss Louis of his legal position. Would your answer be different if the order form signed by Louis on 1st December was written in Chinese?

(b) Benny, a 14 year-old joy rider drove his car very fast, jumped the traffic lights when they were red and collided with a omnibus. Jacky, the driver of the omnibus, was killed instantly. Jacky had consumed a lot of alcohol and also drove the omnibus very fast. The passenger in Jacky’s omnibus, Betty, sustained severe personal injuries. A passerby, Daniel, witnessed the entire accident from a nearby building. He now suffers from post traumatic stress disorder (PTSD). Betty now cannot concentrate on her work as a secretary in a surveyor firm.

Joyce, Jacky’s wife, was told by police about the accident through telephone. But she was in Taipei at that time. She only arrived at the hospital ten hours after the accident and found Jacky already dead. She subsequently suffers from depression as she is very worried about her own future.

Jacky’s father, Ken, was told by Joyce about the death of Jacky five days after the accident. He is now very sad and frustrated.

Mandy, a 15 year old passenger in the car driven by Benny was seriously injured in the accident. Mandy was not wearing a seatbelt at the time of the accident. Mandy knew that Benny did not have a valid driving license.

Advise Benny of his potential liability in the tort of negligence.

Issue

Whether a valid contract was formed in this case, or not? Whether the exclusion contract was valid, or not?

To fulfill a promise, two or more parties come together and form an agreement, whereby for fulfilling the stated promise, consideration is paid. When such an agreement contains some specified elements, it becomes a contract (Clarke & Clarke, 2016). When the promise, i.e., the conditions or stipulations of the contract, are contained in a written document, which is signed by the parties making the promise, it is a known as the written contract. Alternatively, when such stipulations or conditions are finalized in a spoken manner, it forms a verbal contract. Even though both these types of contract are valid, it is preferable to draw a written contract, as in times of dispute the document can be referred to, as evidence (Andrews, 2015).

A contract, to be valid, needs to have an offer, followed by an agreement, which needs to have a consideration, along with the legal intent, clarity and capacity. Only when all these essential elements are present, can a contract be formed (Abbott, Pendlebury & Wardman, 2007). Once an offer is made, the process of forming a contract initiates. An offer shows that the party has the intention of forming the contract. After the offer has been made, the same has to be accepted by the party to which the offer was made (Elliot, 2011). While communicating the acceptance, the offer is altered or modified in any manner such communication is not considered as an acceptance, but as a counter offer. A leading case law, where the altered offer was deemed as a counter offer, is the case of Hyde v Wrench [1840] 49 ER 132 (Marson & Ferris, 2015).

Next essential is the consideration. Consideration is the amount paid for keeping the promise. It can be any amount or value, which is decided mutually amongst the contracting parties (Latimer, 2012). However, it is crucial that a consideration has certain economic value. In Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87, Lord Somervell accepted that the three wrappers were valid consideration, as they were a precedent stipulation (E-Law Resources, 2017a).

Another element while making a contract is the intent for forming the legal relationship, amongst the contracting parties. The parties also need to have the contractual capacity, which is considered as another element of a valid contract. So, the parties of the contract need to have the legal age, as well as, of sound mind. The last and concluding element of any contract is the clarity, regarding the stipulation, condition or terms made under the contract (Gibson & Fraser, 2014).

In case a party to the contract does not fulfill their side of the promise, the contract is deemed (Lambiris & Griffin, 2016). When such a situation takes place, the non-breaching party, or the aggrieved party, can initiate the claims against the breaching party, and claim for monetary, as well as, equitable remedies. Specific performance, rescission and injunction are included in equitable remedies and monetary remedy takes the form of compensation (Ayres & Klass, 2012). In Addis v Gramophone [1909] AC 488, the House of Lords viewed that the rationale of awarding the remedies is to put the aggrieved party in such a position, which could be same as it would have been, if the contract had been performed (E-Law Resources, 2017b).

Rule

Exclusion clause, is one of the clauses in a contract, which has the power of restricting or limiting the liabilities or the rights of the contracting parties. An exclusion clause is considered as valid, only when its incorporation into the contract, has been proper. Moreover, the exclusion clause cannot limit, reduce or extinguish the applicability or the law, nor can it be against the law. If the exclusion clause is established to have been incorporated after the contract was made, it is held as invalid (Abbott, Pendlebury & Wardman, 2007). The leading example of these include the case of Olley v Marlborough Court Ltd (1949) 1 KB 532, and Thornton v Shoe Lane Parking Ltd (1971) 2 WLR 585. In these cases the exclusion clause was deemed as invalid. In Olley, as the exclusion clause was made after the contract was established and hence, it was deemed as invalid. In Thornton, the exclusion clause was at the back of the ticket, which was not visible to Thornton and hence, was deemed as invalid (Mulcahy, 2008).

There is a need to bring the exclusion clause to the notice of the party, against whom, the same is being inserted. In the case of Chapelton v Barry UDC (1940) 1 KB 532, as the exclusion clause was at the back of the ticket, it was held as not-binding. The exclusion clause also has to be reasonable and cannot be referred to some other place. This again holds the exclusion clause invalid, as was established in Thompson v London Midland & Scottish Railway (1930) 1 KB 41 (Roach, 2016). Though, it is not necessary that the individual should have read the exclusion message, as long as it has been properly included, as was held in L'Estrange v Graucob [1934] 2 KB 394 (Swarb, 2017).

In the given case, an offer was made, which was accepted and a consideration was fixed between Louis and Wonderful. The order form given on 3rd December by Benjamin to Louis for it to be signed. This form contained the exclusion clause, which extinguished the liability of Wonderful in case of a loss. As per L'Estrange v Graucob, it does not matter if Louis read the form.

Furthermore, on the receipt of the machines also, an exclusion clause was inserted. This was read by Louis. Hence, both these exclusion clauses are valid. As a result of this, Louis cannot argue for a refund. It remains irrespective if the order form was signed on December 1st. unlike Chapelton, Thompson, Olley, and Thornton, being a properly inserted one, and at the main form, the exclusion clause would remain valid in this case.

Conclusion:

A valid contract was formed between Louis and Wonderful and the exclusion contract was also valid.

Whether Benny has any liability arising out of tort of negligence, or not?

A tort is a civil wrong and negligence is considered as a tort. When a person owes a duty of care to some other person, due to doing something, which can impact such other person; and this is followed by a breach of duty, which results in an injury or loss to the other person, it is a case of negligence (Trindade, Cane & Lunney, 2007). The key principle behind establishing the principle of negligence is to fix a responsibility over the individual, who carries out certain activities, which could pose a threat or harm to the safety of other person. However, such a risk has to be foreseeable, and there has to be a direct causation between the injury and the breach of duty. Once negligence is established, the injured party can claim for monetary compensation, in addition to the non-pecuniary damages for the metal and emotional distress (Lambiris & Griffin, 2016).

Application

In the case of Donoghue v Stevenson [1932] UKHL 100, a case of negligence was established against the manufacturer. This case is also famous as snail in the bottle case. Donoghue was consuming a bottled ginger beer in whilst being in the café in Paisley, Renfrewshire. A dead snail was found inside of the bottle, which resulted in Donoghue’s sickness and she sued the manufacturer for negligence. The judges, while giving the verdict of this case, held that Stevenson, as a manufacturer, did owe a duty of care to all such consumers, who consumed his manufactured ginger bottle beer. And a result of this, Stevenson had to compensate Donoghue for negligence (British and Irish Legal Information Institute, 2017).

In the Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd [1961] UKPC 2, aka the Wagon Mount case, as the main cause of fire was remote, the damages of the fire were held to be not payable by the defendant (H2O, 2016). In Vaughan v Menlove (1837) 132 ER 490 (CP), the defendant breached the duty of care, by not paying head to the various warning given to him for a possible fire due to poor ventilation (Commonwealth Legal Information Institute, 2017).

Contributory negligence is one of the principles or defenses used in the case of negligence. When the actions of the individual are such that they contribute to the breach of duty of care by the other person, it is the case of contributory negligence. And in such cases the amount of damages awarded to the individual are reduced by the amount of their contributory negligence (Dongen, 2014). One of such cases where this principle was established is the case of Davies v Swan Motor Co [1949] 2 KB 291. In this case, as Davies was held to be standing at the side of lorry, it was taken as the contributory factor to Davies’ injuries. And as a result of this, the damages which were awarded to Davies by the court of law were reduced proportionately (Swarb, 2016).  

Applying the principles established above, Benny would be held as negligent, as he was driving the car very fast. This resulted in injuries to Mandy. So, Benny would have to compensate Mandy for negligence as per Donoghue v Stevenson. Though, Mandy was not wearing seat belt when the accident occurred and he was also aware that Benny did not have a valid driving license. So, applying Davies v Swan Motor Co, the amount of damages awarded to Mandy for the negligence of Benny would be reduced by the amount of his contributory negligence. This amount is decided upon the discretion of the court.

In the other case, Jacky was driving under the influence of alcohol. This made the chances of an accident quite high. In addition to this, he was driving the omnibus in a very fast manner. So, the resulting accident was his negligence. And hence, he is liable for the injuries caused to Daniel and Betty, and Benny. But the fast driving of Benny would be deemed as a contributory negligence in this case, and so the damages awarded to Benny would be reduced accordingly. For the depression of Jacky, Benny could not be sued, as there is no direct causation, between the contributory negligence of Benny and the depression of Joyce. This is because of negligence of Jacky that the accident was caused and the contributory negligence can be only used as defense, but the same cannot be used as reason for Joyce’s depression.

Conclusion:

Hence, Benny has legal liability arising out of tort of negligence for the case of Mandy, as well as, because of the contributory negligence for the case of Jacky.

References:

Abbott, K., Pendlebury, N., & Wardman, K. (2007). Business Law (8th ed.). London: Thomson.

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

Ayres, I., & Klass, G. (2012). Studies in Contract Law (8th ed.). New York: Foundation Press.

British and Irish Legal Information Institute. (2017). Donoghue v Stevenson [1932] UKHL 100 (26 May 1932). Retrieved from: https://www.bailii.org/uk/cases/UKHL/1932/100.html

Clarke, P., & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3rd ed.). South Melbourne: Oxford University Press.

Commonwealth Legal Information Institute. (2017). Vaughan v Menlove. Retrieved from: https://www.commonlii.org/uk/cases/EngR/1837/424.pdf

Dongen, E.V. (2014). Contributory Negligence: A Historical and Comparative Study. Boston: Brill Nijhoff.

E-Law Resources. (2017a). Chappel v Nestle [1960] AC 87 House of Lords. Retrieved from: https://www.e-lawresources.co.uk/Chappel-v-Nestle.php

E-Law Resources. (2017b). Addis v Gramophone [1909] AC 488 House of Lords. Retrieved from: https://e-lawresources.co.uk/cases/Addis-v-Gramophone.php

Elliot, C. (2011). Contract Law (8th ed.). London: Pearson.

Gibson, A., & Fraser, D. (2014). Business Law 2014 (8th ed.). Melbourne, Pearson Education Australia.

H2O. (2016). Wagon Mound (No. 1) -- "The Oil in the Wharf Case". Retrieved from: https://h2o.law.harvard.edu/collages/4919

Lambiris, M., & Griffin, L. (2016). First Principles of Business Law 2016. Sydney: CCH.

Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia Limited.

Marson, J., & Ferris, K. (2015). Business Law (4th ed.). Oxford: Oxford University Press.

Mulcahy, L. (2008). Contract Law in Perspective (5th ed.). Oxon: Routledge.

Roach, L. (2016). Card and James' Business Law (4th ed.). Oxford: Oxford University Press.

Swarb. (2016). Davies v Swan Motor Co (Swansea) Ltd: CA 1949. Retrieved from: https://swarb.co.uk/davies-v-swan-motor-co-swansea-ltd-ca-1949/

Swarb. (2017). L’Estrange v F Graucob Limited: CA 1934. Retrieved from: https://swarb.co.uk/lestrange-v-f-graucob-limited-ca-1934/

Trindade, F., Cane, P. & Lunney, M. (2007). The law of torts in Australia (4th ed.). South Melbourne: Oxford University Press.

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