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Lantern Solicitors Contract Law & Business Law Own, Nirmal V Martens Fiona Myers, Solicitor 5/1/2011

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Page 1: Lantern Solicitors

Lantern Solicitors

Contract Law &

Business Law Own, Nirmal V Martens

Fiona Myers, Solicitor

5/1/2011

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TABLE OF CONTENTS

Law Applied .............................................................................................................................................................................. 5

Introduction................................................................................................................................................................................ 6

Definition of Contract .............................................................................................................................................................. 7

Terms and Conditions of a Contract ............................................................................................................................... 8

Offer............................................................................................................................................................................................ 8

The cases that apply to Offer in contract Law: ................................................................................................ 8

Test 1. – Clear Terms ...................................................................................................................................................... 8

Example Case: ............................................................................................................................................................ 8

Example Act:.................................................................................................................................................................. 9

Applying it to your case: ............................................................................................................................................. 9

Test 2. – Intention to do business. .............................................................................................................................. 9

Example Case: .............................................................................................................................................................. 9

Applying it to your case: ............................................................................................................................................. 9

Test 3. – Must be communicated to the Offeree .................................................................................................... 9

Example Case: ............................................................................................................................................................ 10

Applying it to your case: ........................................................................................................................................... 10

Acceptance ....................................................................................................................................................................... 10

Case that applies to Acceptance: .............................................................................................................................. 10

Test 1 – Mirror Image .................................................................................................................................................... 10

Example case: ............................................................................................................................................................. 10

Applying it to your case: ........................................................................................................................................... 11

Test 2 – Firm .................................................................................................................................................................... 11

Example Case: ............................................................................................................................................................ 11

Applying it to your case ............................................................................................................................................ 11

Test 3 – Communication of Acceptance ................................................................................................................. 11

Example Case: ............................................................................................................................................................ 11

Verbal ............................................................................................................................................................................. 11

Example Cases:.......................................................................................................................................................... 12

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Electronic ...................................................................................................................................................................... 12

Example Cases:.......................................................................................................................................................... 12

Postal.............................................................................................................................................................................. 12

Example Cases:.......................................................................................................................................................... 12

Applying it to your case: ........................................................................................................................................... 12

Consideration........................................................................................................................................................................... 13

Definition of Consideration: ............................................................................................................................................ 13

The cases that applies to Consideration: ........................................................................................................... 13

Test 1. Consideration must be past .......................................................................................................................... 13

Example Cases:.......................................................................................................................................................... 14

Applying it to your case: ........................................................................................................................................... 14

Test 2. Consideration must be Sufficient ....................................................................................................................... 14

Example Cases: ............................................................................................................................................................. 14

Applying it to your case:.............................................................................................................................................. 14

Test 3. Consideration if not Sufficient ........................................................................................................................... 14

Intention.................................................................................................................................................................................... 15

Definition of Intention: ..................................................................................................................................................... 15

Presumption 2..................................................................................................................................................................... 15

Example Case: ............................................................................................................................................................... 15

Applying it to your case: ....................................................................................................................................................... 15

Privity of a Contract .......................................................................................................................................................... 15

Definition of Priv ity of a Contract:................................................................................................................................. 15

Example cases: .............................................................................................................................................................. 16

Applying it to your case:.............................................................................................................................................. 16

Capacity .................................................................................................................................................................................... 16

Definition of Capacity: ..................................................................................................................................................... 16

People with Limited Capacity ......................................................................................................................................... 16

Necessary goods and services:.................................................................................................................................... 16

Incapacitated Persons ................................................................................................................................................... 17

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Capacity of Companies ................................................................................................................................................ 17

Applying it to your case:.............................................................................................................................................. 17

What can invalidate a Contract?........................................................................................................................................... 17

Duress .................................................................................................................................................................................. 17

Definition of Duress: ......................................................................................................................................................... 18

Example Cases: ............................................................................................................................................................. 18

Applying it to your case:.............................................................................................................................................. 18

Mistake ................................................................................................................................................................................ 18

Definition of Mistake: ....................................................................................................................................................... 18

Applying it to your case:.............................................................................................................................................. 18

Undue influence ................................................................................................................................................................. 19

Definition of Undue Influence: ....................................................................................................................................... 19

Applying it to your case:.............................................................................................................................................. 19

Misrepresentation............................................................................................................................................................... 19

Definition of Misrepresentation: ..................................................................................................................................... 19

Fraudulent: .......................................................................................................................................................................... 19

Nigligent:............................................................................................................................................................................. 19

Innocent: .............................................................................................................................................................................. 20

Example case: ................................................................................................................................................................ 20

Applying it to you case: ............................................................................................................................................... 20

Void, Voidable and enforcable contracts............................................................................................................................ 20

Conclusion ............................................................................................................................................................................... 21

References & Bibliography................................................................................................................................................... 22

Appendices............................................................................................................................................................................... 23

Appendices 1. ..................................................................................................................................................................... 23

Appendices 2. ..................................................................................................................................................................... 23

Appendices 3. ..................................................................................................................................................................... 23

Appendices 4. ..................................................................................................................................................................... 24

Appendices 5. ..................................................................................................................................................................... 24

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Appendices 6. ..................................................................................................................................................................... 24

Appendices 7. ..................................................................................................................................................................... 24

Appendices 8. ..................................................................................................................................................................... 24

Appendices 9. ..................................................................................................................................................................... 25

Appendices 10. ................................................................................................................................................................... 25

Appendices 11. ................................................................................................................................................................... 25

Appendices 12. ................................................................................................................................................................... 26

Appendices 13 .................................................................................................................................................................... 26

Appendices 14 .................................................................................................................................................................... 26

Appendices 15 .................................................................................................................................................................... 27

Appendices 16 .................................................................................................................................................................... 27

Appendices 17 .................................................................................................................................................................... 27

Appendices 18 .................................................................................................................................................................... 28

Appendices 19 .................................................................................................................................................................... 28

Appendices 20 .................................................................................................................................................................... 28

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LAW APPLIED

In this report I will be covering the contract laws that apply to your case. These laws will determine

where or if you’ve formed a contract with the two defendants. These laws will come under the areas

of:

- Offer - Acceptance - Consideration

- Intention - Capacity

If you carry on to the report I will then explain these areas more in detail.

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INTRODUCTION

I am a solicitor who works for Lantern Solicitors; I am going to help you identify which contract you

have and who the contract is with. Also I will explain if you have to abide by the terms of the contract

to do this I am going to explain each law that the situation is within at the end you will then know who

the contract is with and if you have to obey.

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DEFINITION OF CONTRACT

There are two definitions for contract there is the Standard English definition and the Law definition.

As this report is based on Law I will be defining the Law definition of contract which is:

“an agreement with specific terms between two or more persons or entities in which there is a

promise to do something in return for a valuable benefit known as consideration. Since the law of

contracts is at the heart of most business dealings, it is one of the three or four most significant areas

of legal concern and can involve variations on circumstances and complexities. The existence of a

contract requires finding the following factual elements: a) an offer; b) an acceptance of that offer

which results in a meeting of the minds; c) a promise to perform; d) a valuable consideration (which

can be a promise or payment in some form); e) a time or event when performance must be made

(meet commitments); f) terms and conditions for performance, including fulfilling promises; g)

performance.”

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TERMS AND CONDITIONS OF A CONTRACT

In this section I am going to explain the terms and conditions for a contract. This will help you

determine whether the contract you made with the two defendants was valid or invalid. Each term

needs to be met for there to be contract formed between you and them. There is five elements that

make up a valid contract but there is three tests that you can do to check if each of these elements

apply to the contract to see if it’s valid or not. The five elements are: Offer, Acceptance,

Consideration, Intention and Capacity.

OFFER

An offer is how the person(s) show intention to apply certain terms to a contract which is then binded

as soon as it is accepted by the person accepting the contract.

TREITAL’S DEFINITION:

‘An expression of willingness to contract on certain terms, made with the intention it shall be binding

as soon as it is accepted by the person to whom it is addressed.’

For example any product that is for sale by a seller is an offer to the customers.

There are two types of offers Bilateral and Unilateral. Bilateral is an offer between two people (parties)

who know the terms which will ‘bind’ them. Unilateral is an offer that is offered to the whole world but

this means that not all people (parties) know of the terms to which that might ‘bind’ them or not.

An easier way of remembering these two offers are to see Bi as liking two

different things I.e. Bi-lateral, and Uni meaning Universal – to everyone I.e. Uni-lateral.

The cases that apply to Offer in contract Law:

- Carlill – v- Carbolic Smoke ball Company (1803) (See appendices 1 to see

the full case.)

- Hilas – v- Arcos (1932) (See appendices 2 to see full case)

- Fisher – v- Bell (1961) ( See appendices 3)

To apply the three tests to check if there is an offer you have to see if there are clear terms, Intention

to do business and Communication to do business. All these tests have to be passed before you can

carry on to the other elements of a contract.

TEST 1. – CLEAR TERMS

To assess whether there is clear terms within the offer you have to make sure that the offer is clearly

set out to the Offeror and Offeree. If it’s not then the first test has not been passed.

Example Case:

In the case of Carlill – v – Carbolic Smoke ball Company (1803) the terms were set out on paper

when they advertised the Carbolic Smoke ball to the public. There terms was if anyone who brought

the Carbolic Smoke ball and ‘Used the carbolic smoke ball in a particular way for a specified period of

time, but who still caught influenza afterwards, would be entitled to claim £100 from the company’

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EXAMPLE ACT:

The Act that could be applied to this would be The Sales of Goods Act 1979. As Section 8 of the

contract says ‘‘if there is no price on a product then a reasonable price would apply’. this would be

applied to the Case Hailas –v – Harcos as the terms of price was changed

APPLYING IT TO YOUR CASE:

The clear terms that you the Offeror set out for the Offeree was within the advertisement. In the

advertisement you stated “Annual subscription for Sport life delivered to your door, only £200. Special

bonus– subscribes by 20 April and get £50 worth of free sports equipment” you also stated in smaller

print that “Special bonus offer may be withdrawn at any time.”

The terms you set out was clearly stated on the advertisement which means you have passed Test 1.

If you hadn’t clearly set out your terms then you wouldn’t have had a contract with Nirmal or Owen.

This means you can go onto the second test.

TEST 2. – INTENTION TO DO BUSINESS.

For the second test to be passed, you the Offeror, Nirmal and Owen the Offeree must have shown

intention to do business. There are many ways this could be shown through physical or verbal

communication. For example the Offeree can show intention by picking an item off a shelf within a

store and then taking it to the till to be purchased or asking for information about the product and then

taking it to the till to be purchased. And the Offeror can show intention to do business by making an

advertisement for a product and then placing the product within their store.

This can be also be confused with Invitation to Treat. This is where the Offeror can

advertise a product but not have any intention or obligation on selling the product to any consumer.

The case that applies to Invitation to Treat is Fisher – V- Bell (1961)

EXAMPLE CASE:

In the case of Carlill – V- Carbolic Smoke Ball Company (1893) the company showed intention to do

business by making and applying the advertisement for the Smoke Ball but also putting the product

within their store. Carlill showed intention to do business by asking for informat ion about the product

and taking it to the check out to be purchased.

APPLYING IT TO YOUR CASE:

As you the Offeror placed the advertisement within the paper shows that you had intention to do

business. Nirmal and Owen showed intention by sending acceptance letters to you. As you both

showed intention to do business this test has therefore been passed which means you now can go on

to test 3.

TEST 3. – MUST BE COMMUNICATED TO THE OFFEREE

For the third test to be passed you the Offeree must have received some kind of communication of

the Offeror that there are willing to accept the offer that you have shown. This can be shown by the

Offeror taking their shopping to the checkout or putting money into the vending machine.

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EXAMPLE CASE:

In the case of Carlill – v – Carbolic Smoke ball Company (1893) there was communication to the

company the moment Carlill took the item to be purchased.

APPLYING IT TO YOUR CASE:

As both Nirmal and Owen both sent letters of acceptance to you the Offeree this has given you the

communication needed to accept the offer that you have shown. As they communicated to you the

Offeree this means that Test 3 has been passed and we now can go onto the second stage of

Contract which is Acceptance.

ACCEPTANCE

Acceptance is the moment when all participants agree to the terms in an offer.

Treital’s Definition:

“ The finial and unqualified assent to the terms on offer”

CASE THAT APPLIES TO ACCEPTANCE:

- Carlill – v- Carbolic Smoke Ball Company (1893) ( see appendices 1)

- Jones – v- Daniel(1894) (see appendices 4)

- Adams – v- Lindsell (1818) ( See appendices 5)

- Felthouse – v- Bindley (1862) ( See appendices 6)

- Errington –v- Errington & Woods [1952] ( see appendices 7)

- Powell – v- Lee (1908) (See appendices 8)

- Byrne -v- Van Tienhoven [1880] ( see appendices 9)

- Adam – v- Lindsell (1818) (See appendices 10)

- Butler Machine Tools ltd -v- Ex-Cell-O ltd (1979) (See appendices 11)

To apply the three tests to check if there is an acceptance you have to see if there are Mirror

Image, Must be firm and Communicated of Acceptance. All these tests have to be passed before

you can carry on to the other elements of a contract.

TEST 1 – MIRROR IMAGE

To form a mirror image the deal must be exactly the same offered as well as being brought. For

example they both have to have a benefit from doing the deal, a debt and both would have to accept

the terms.

EXAMPLE CASE:

In the Case Jones – V- Daniel (1894) (See appendices 4 for full case) the Offeree who received an

offer from the Offeror responded to them by submitting a draft contact that the Offeror had sent them

this included new terms. This then was classed as a counter offer not an acceptance so therefore was

not a Mirror Image of the offer that the Offeror made. If the Offeree accepted the first offer then this

would have been a mirror image of the offer that the Offeror had sent to them.

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APPLYING IT TO YOUR CASE:

As Nirmal or Owen didn’t try and make a counter offer with yourself but accepted the terms to which

you advertised the offer to them. This means that they did show a mirror image of the offer so

therefore the first test of acceptance has been passed so we now can go on the second test of

acceptance.

TEST 2 – FIRM

For the acceptance to be firm there must not be any reason for there to be doubt that either party did

not want to carry out the contract. For example there must be a firm yes or no.

EXAMPLE CASE:

In the case Felthouse – v- Bindley there wasn’t a firm acceptance because the Offeror had not made

any sort of acceptance. Even though he might have intended to accept by asking the auctioneer to

take the horse from sale there wasn’t a definite proof of the acceptance and therefore it was not firm.

APPLYING IT TO YOUR CASE

In your case Nirmal’s and Owens acceptances were clearly shown to be firm because they both sent

letters of acceptance to yourself as well as the £200 in cash. This clearly shows that both had

accepted the term that you had clearly set so therefore means it was a firm acceptance. This means

that the second test has been passed so we can now go onto the third test.

TEST 3 – COMMUNICATION OF ACCEPTANCE

For it to be clearly communicated to the Offeror there are four ways which are Conduct, Verbal,

Electronic and Postal. Each of these have certain laws and terms that everyone has to abide by, I am

now going to explain each of these in detail

CONDUCT

This is the action that the Offeror has accepted an offer. This communication is usually instant which

means the contract would be accepted immediately.

EXAMPLE CASE:

In the case of Errington –v- Errington & Woods (1952) the Offerors showed his acceptance through

conduct by paying of the mortgage payments through the terms within the offer otherwise there would

be no reason for them to pay the mortgage

VERBAL

It is exactly how it is said, for the acceptance to be verbal the words would have to be spoken out

loud. This would only be accepted through face to face encounters not through Telephone calls as

this would be classed as electronic which I will explain later on.

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EXAMPLE CASES:

In the case of Powell – v- Lee (1908) acceptance was made by the defendant verbally but was not

intention to do business.

ELECTRONIC

This is where acceptance is made through electronic devices. For example: Telephone. This would be

classed as a delayed acceptance as it may take a while for the Offeree to accept the offer. This offer

is only final once they have received and read the offer.

EXAMPLE CASES:

In the case of Bryne – v- Van Tienhoven (1880) acceptance was shown when they sent a telegram

and affirmation through letter. As they used both these methods it allowed the claimant to ensure that

the defendant received the acceptance. As sending the acceptance through telegram meant that it

would be delayed.

POSTAL

This is where the acceptance is accepted through the post i.e. Letter. It is different from electronic

acceptance as there is a delay but it is classed as instant acceptance as there is a postal law. This is

where the moment the letter has been posted the acceptance is formed even if the Offereee has

received the letter or not.

EXAMPLE CASES:

In the case of Adams – v- Lindsell (1818) this case was affected by postal law because the claimant

posted his letter on the 5th September, this meant that the contract was formed even though the

defendant did not know that the letter of acceptance was sent he still lost the case.

In the case of Butler Machine Tools LTD – v- Ex-cell-O LTD (1979) the postal acceptance was when

the claimant sent their slip that indicated that they were happy with the contract that the defendant

had formed including their terms; this means that the claimant lost the case.

APPLYING IT TO YOUR CASE:

In your case the method that was used for acceptance is postal is was used by both Offerors

so this means that the Postal Law was would apply to your case. Both Nirmal and Owen

formed a contract with you the moment they had written and posted their acceptance.

Even though you did change the offer on the 15th of April and technically any letters of

acceptance sent after this point for the special offer as well as annual subscription of

Sportlife should not apply as you had redrawn the special offer but still offered the annual

subscription of Sportlife. You did warn the customer that you could do this at any time.

Which means Owen who sent his letter the day after you redrew the offer should only be

entitled to the annual subscription not the offer. However when Nirmal sent his letter of

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acceptance on the 30th March the contract between you two was made before you had

retracted the special offer which means that Nirmal should get the full offer of an annual

subscription of Sportlife and the special bonus offer.

CONSIDERATION

Consideration is where the value must be passed from one party to another through a

contract. The word ‘Value’ doesn’t necessarily mean money but anything that is financial

value for example when someone put their time and effort into a task. When consideration is

put in place the Offeree’s and O

ffoerors terms are now called promise and promisor.

Definition of Consideration:

‘to constitute a simple contract an agreement must amount to a bargain, each of the parties

paying a price for that which he receives from the other’ (page 98; ninth edition; Osborn’s

concise law dictionary; edited by Sheila Bone)

There are two types of consideration that you will have to remember which are executory

and executed. They both have different meanings they are:

Executory – ‘ Remaining to be carried out into effect. An executor contract is one which

takes form of promises to be formed in the future’ (page 161; ninth edition; Osborn’s concise

law dictionary; edited by Sheila Bone)

Executed – ‘ Done. Of a document, one which is formally signed’ (page 161; ninth edition;

Osborn’s concise law dictionary; edited by Sheila Bone)

THE CASES THAT APPLIES TO CONSIDERATION:

- Mcardle (1951) (See appendices 12)

- Stewart – v- Casey (1892) (see appendices 13)

There are three rules in which must be considered when considering if there has been

consideration within a contract these three rules are Consideration MUST be past,

Consideration MUST be sufficient and consideration IF not sufficient.

TEST 1. CONSIDERATION MUST BE PAST

This test determines whether there is a valid consideration, to determine whether there is

then there must be one made at the first instant that the contract becomes effective or after it

has been made. Never before.

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EXAMPLE CASES:

In the case of Re Mcardle(1951) the promise of paying the brother and wide was not legally

binding as the work that had been done was done before the contract was made between

them, this would then be classed as past consideration.

In the case of Stewart – v- Casey (1892) the court said that the employers has to pay the

employee as the employee worked at their request which made it reasonable for him be

expected to be paid. This is classed as Employee and Employer relationship where past

consideration is allowed.

APPLYING IT TO YOUR CASE:

In your case you formed the contract with Nirmal and Owen the moment they sent the

money in the post, but only so that you would supply them with the subscription you offered

as well as the special bonus. This means that consideration was not past.

TEST 2. CONSIDERATION MUST BE SUFFICIENT

The Word ‘Sufficient’ means that the consideration must be acceptable either by the value of

money or performance that someone has made.

EXAMPLE CASES:

In the case of Alliance bank – v- Broome (1864) it was considered to be sufficient

consideration because they promised that wouldn’t take action to recover the loan if the

defendant had security to give for it. This is classed as sufficient as the defendant and client

both receive something from the contract that they have formed.

APPLYING IT TO YOUR CASE:

In your case you had applied sufficient consideration for Nirmal as the contract you formed

with each other you both benefit from it as Nirmal has given you the money for the £200

Bonus as well as the annual subscription of Sportlife but for Owen there isn’t sufficient

consideration as he had sent off the money to you but does not receive the £200 Bonus but

instead receives the subscription of Sportlife on its own. This means that the test for

Sufficient consideration is not passed when it comes to the case of Owen on his own.

TEST 3. CONSIDERATION IF NOT SUFFICIENT

This is important as you have to be aware that a promise by a creditor to accept sum owed

does not discharge the legal terms that they have to pay the full balance eventually.

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INTENTION

This is the fourth stage of a contract. This is where both parties show an interest within an

offer and then act upon it.

DEFINITION OF INTENTION:

‘The purpose, aim or desire which an act is done’ ( Page;211;Ninth Edition; Osborne’s

Concise Law Dictionary: edited by Shelia Bone)

There is only one test for Intention and that is called Presumption two. I will now explain

what assumption two is.

PRESUMPTION 2.

This means that if both parties both formally agree to any contract with valid consideration,

then this means they both had intention to do so. This does not apply if the contract states

that neither of the parties wish to be legally bound to the contract.

EXAMPLE CASE:

In the case of Rose –v – Crompton (1923) (See appendices 14) there was a section of the

contract that stated that the two parties didn’t want to be legally binded and that the contract

was a record purely for themselves.

In the case of Jones – v- Vernon Pools (1938) (See appendices 15) the statement within the

contract said it was ‘binding in honour only’ which allowed it to be not within legal terms. This

allowed the defendants to only honour the contract if they chose to.

APPLYING IT TO YOUR CASE:

As you nor Nirmal or Owen did not imply that you didn’t wish to be legally bound. This

means that all parties within the contract wished to legally bound to the terms. This means

there was valid intention.

PRIVITY OF A CONTRACT

Privity of contract can also be used to prove intention. The person(s) that are involved with

the contract are the ones who can benefit from it or who can be just involved in the contract

in some way. This means that third parties aren’t usually affected by two other parties.

DEFINITION OF PRIVITY OF A CONTRACT:

‘The doctrine of privity of contract states that a contract cannot usually give rights or impose

obligations on anyone who is not a party to the contract’

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EXAMPLE CASES:

In the case of Pneumatic Tyre Co LTD – v- Selfridge and Co LTD (1915) (see appendices

16) Dunlop was a third party within their contract which meant that Selfridges was unable to

sue Dunlop because they did not have the contract with them they had the contract with

Pheumatic Trye Co LTD.

APPLYING IT TO YOUR CASE:

As there was no third party involved then this section does not apply to you. I have put this

within the report for you to look back at for future reasons.

CAPACITY

This is the final stage this will explain to you whether Owen or Nirmal has the legal power to

enter the contract that you had made with them.

DEFINITION OF CAPACITY:

‘in order to form a wholly valid contract, the parties must have legal capacity’ (page 69: Ninth

Edition; Osborne’s Concise Law Dictionary: edited by Shelia Bone)

There are two types of Capacity there is people with limited and capacity of organisations. I

will now explain in full detail what these two mean.

PEOPLE WITH LIMITED CAPACITY

There are different types of people who have limited capacity. Minors which are children

under the age of 17 cannot enter into any legal contracts unless it is beneficial contracts of

service or it’s the supply of necessary good and services.

NECESSARY GOODS AND SERVICES:

Necessary goods and services are classed as the items that are essential for the minor life.

For example: education. They have made a mobile phone an essential item for a minor’s life

as they have adapted to the times of society. This means that minor can form a legal

contract when purchasing a phone. The items that are not classed as essential to minors are

items that do not affect the minors life in such a way that they cannot carry on living for

example a Nintendo Ds.

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INCAPACITATED PERSONS

Another type of person that have limited capacity. The type of people under this would be

people with mental disability who have been sectioned under the Mental Health Act 1983.

Whoever is sectioned under this act do not have the legal capacity of entering any contract,

even though this is the case the court may want to enter a contract on the person in

questions behalf if the contract was made before the person was diagnosed. Those who

have temporary sanity due to drugs or alcohol can find that the contract they make during

that time frame can be voided if they can prove that they did not have understanding at that

time when they entered the contract.

CAPACITY OF COMPANIES

If a company is registered at Companies House under the Companies Act (1985) allows the

company to have a legal identity of its own and can sue or be sued under its own name, if it

was not registered they do not have any legal power. If anyone acts on the behalf of the

company when it is not registered they will be personally help responsible for any contract

they form. Unincorporated Associations are not legal entities so capacity belongs to all

members of the association this also applies to anyone within a partnership. Local

Authorities who are under the Local Government Act (1972) or the Royal Charter are

separate legal entities and do have capacity to any contract formed in their own right. If they

go beyond their legal rights it is known as ‘Ultra Vires’

APPLYING IT TO YOUR CASE:

When you look at the Capacity of both Nirmal and Owen they both did not have limited

capacity when they entered the contract with you. They were not incapacitated or have a

known disability and both are over the age of 18. This means that they had valid capacity to

enter the contract with you.

WHAT CAN INVALIDATE A CONTRACT?

Even though the five sections above of contract law have been fully assessed and tested

there are still possible factors that could lead to an invalid contract. These such possible

factors are Duress, Mistake, Undue Influence and Misrepresentation. Below I will now

explain each of these in detail.

DURESS

Duress is where the person who has entered the contract had done so due to force from the

other party, for example if the person was blackmailed into entering the contract.

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DEFINITION OF DURESS:

‘unlawful pressure to perform an act.’ (page 144: Ninth Edition; Osborne’s Concise Law

Dictionary: edited by Shelia Bone)

Anyone who is to enter a contract must be willing to enter it on their own without any force.

EXAMPLE CASES:

In the case of Barton – v- Armstrong (1975) ( see appendices 17) the contract was only

signed because he was threatened by Armstrong, this meant that the contract was not valid

due to being under duress.

In the case of D&C –v – Rees (1965) (see appendices 18) the claimant was held to ransom

as they were offered less than what they deserved as they had financial issues they had no

choice but to accept the ransom

APPLYING IT TO YOUR CASE:

As you did not force Nirmal or Owen to enter the contract between you and them then this

means that the contract with them was formed on right terms and therefore there is a

contract between you still.

MISTAKE

A mistake is simply was it is. It’s a misunderstanding that can be taken place.

DEFINITION OF MISTAKE:

‘A mistake may nullify consent e.g. the parties contract on a fundamental mistaken basis or

negative consent e.g. the parties never reach agreement because of the mistake’ (page 254:

Ninth Edition; Osborne’s Concise Law Dictionary: edited by Shelia Bone)

Mistakes most of the time do not have an effect on contracts validness it is also known as

‘Caveat Emptor’ which means buyer beware. For the parties to avoid these situations they

must be aware of the terms laid out in the contract that they want to agree to. If they do not

then this could be there mistake, their fault as they did not take it upon themselves to read

the terms before agreeing to the contract.

APPLYING IT TO YOUR CASE:

As you have stated that both Nirmal and Owen read through the terms that you laid out to

them means that they did not make a mistake in forming the contract with you. Even though

Owen read the terms but did not decipher the fact that you could redraw the special offer at

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any time does not mean that he did not have an invalid contract with you, he just made the

mistake of not reading your terms correctly.

UNDUE INFLUENCE

This is where one of the persons within a contract has a higher part over the other. Usually

they use this to influence the weaker person to form the contract. This may lead the courts in

referring the contract as being invalid.

DEFINITION OF UNDUE INFLUENCE:

‘ the equitable doctrine that where a person enters into an agreement or makes a disposition

of property under such circumstances as to show (Actual undue influence) or give rise to the

presumption that he has not been allowed to exercise a free and deliberate judgement on

the matter’ (page 391: Ninth Edition; Osborne’s Concise Law Dictionary: edited by Shelia

Bone)

APPLYING IT TO YOUR CASE:

As you did not have any influence on Nirmal and Owen to form the contract with you this

section would not affect the contract that you have with them.

MISREPRESENTATION

This where if a person entering a contract states anything that is untrue or any action that

can lead to misrepresentation during discussing the contract can lead to the contract being

invalid.

DEFINITION OF MISREP RESENTATION:

‘a representation that is untrue ; a statement or conduct which conveys a false or wrong

impression’ (Page 253: Ninth Edition; Osborne’s Concise Law Dictionary: edited by Shelia

Bone)

It can also be broken down into three sections these are, Fraudulent, Negligent and

innocent.

FRAUDULENT:

This is where someone has made a statement on purpose knowing that it is false to mislead

the other party within the contract.

NIGLIGENT:

When someone makes a statement that they do not know if true or not.

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INNOCENT:

Is where someone makes a statement about the contract that they truly believed was true.

Each of these could lead to contracts being revoked or the other party for being sued for

damages.

EXAMPLE CASE:

In the case of Spice Girls LTD – v- Aprilia World Services BV (2000) (See appendices 19) as

the spice girls represented that no-one intentionally want to leave the group which means

this was classed at misrepresentation which led to the Spice Girls LTD losing the case. As

Aprilia wouldn’t have entered the contract if they knew that one of the members was going to

leave the group.

In the case of Hedley Bryne & Co LTD – v- Heller & Partners (1964) (See appendices 20)

Heller and Heller both stated that Hedley’s Business were financially okay so when they

went to court they were said to be the ones with the duty of care to Hedley as it negligently

misrepresented the companies status.

APPLYING IT TO YOU CASE:

Reading through your case suggests that there is no incline of you misrepresenting yourself

to Nirmal or Owen when the contract was being formed. This means that these sections do

not apply to your case.

VOID, VOIDAB LE AND ENFORCABLE CONTRACTS

Void contracts have no binding effect at all it is a contradiction of terms. Lawyers use it to

describe a situation in a contract where there’s inconvenience. Voidable contract allows one

party to have a right to dismiss a contract. Enforceable contract is valid but it cannot be

enforced when it comes to the court of law by either party if one tries to refuse to obey by the

contract. (The Law of contract: Smith and Keens: English law; Denis Keens)

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CONCLUSION

After accessing your case and applying all the aspects of Contract law. I have concluded

that you have a contract with both Nirmal and Owen as all five stages were passed within

the contract.

The contract that you have with Nirmal is that he gets the Annual Subscription and the

Special Bonus Equipment as he entered for this before the bonus got revoked whereas

Owen’s contract with you is only for the Annual Subscription as he made the mistake of

knowing you can revoke the offer at any point but still tried to form the contract with you after

the date you did revoke the contract. This is a mistake on his part only not yours as he was

warned by a friend to that you had revoked the offer.

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REFERENCES & B IB LIOGRAPHY

References Bibliography

http://legal-dictionary.thefreedictionary.com/contract

http://legal-dictionary.thefreedictionary.com/contract

Ninth Edition; Osborne’s Concise Law Dictionary: edited by Shelia Bone)

The Law of contract: Smith and Keens: English law; Denis Keens

Seventh edition: The company’s constitution and powers; Cases and Materials in company law: Ls sealy

Making contract: English law text and cases: Smith and Keenans

Shears 1998: Law for GCSE

Gulshan s & Kapoor: Business law including company law

Richards,Dransfield and Govmer 2010: Btec level 3 business book 2.

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APPENDICES

APPENDICES 1.

Carlill – v- Carbolic Smoke Ball Company (1893) (Page 118: The company’s constitution and

powers: Cases and Materials in company law: 7th Edition: Ls Sealy)

The Carbolic Smoke Ball Company advertised in the Pall Mall Gazette in 1891 that their

Carbolic Smoke Ball was a cure for flu, bronchitis, coughs, colds, headaches, hay-fever,

whooping cough, laryngitis and sore throats amongst others.

It was so confident of the usefulness of the carbolic smoke ball and it ability not only

to cure but also to prevent someone from getting the flu that it advertised on the following

basis: anyone who used the carbolic smoke ball in a particular way for a specified period of

time, but who still caught influenza afterwards, would be entitled to claim £100 from the

company.

The advertisement went on to say that the company had gone so far as to

deposit £1000 in the Alliance Bank in the event of any such claims. The Claimant (Mrs

Carlill) saw the advertisement and decided to buy one of the carbolic smoke balls. She used

it exactly as advised, but still caught influenza.

Carbolic Smoke Ball refused to pay and Carlill sued for damages arising from breach of

contract. Judgement for 100 pounds was entered for Carlill and Carbolic Smoke Ball

appealed.

Held, affirming the decision of Hawkins, J, that the above facts established a contract by

the defendants to pay the plaintiff 100 in event which had happened

APPENDICES 2.

Hilas – v- Arcos (Page 737: Making the contract: English Law Text and Cases: Smith and

Keenans)

A detailed agreement for the supply of timber by RR to AA during 1930 also contained an

option clause, allowing AA to buy more timber during 1931 but omitting details such as the

type of wood, the sizes required, and the ports to which it was to be shipped. The House of

Lords said there was still a binding contract in respect of the later year; it showed a clear

intention to be bound, and the details not resolved in the document could be supplied by

reference to the previous dealings between the parties and the normal practices of the

timber trade. The contract was to buy 22,000 standards of softwood of fair specification.

The court ruled that fair specification was not sufficiently vague to void the contract, as the

companies had done business before and each would have known the others' intentions.

APPENDICES 3.

Fisher- v- Bell (1961) (Page 198: Shears 1998:)

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It was statutory offence under the Restriction of offensive Weapons Act 1959 to offer for

sale any of various items, including flick-knives.

A Bristol shopkeeper such a knife in his window with a ticket reading “ejector knife – 4s”

(4 shillings = 20p)

APPENDICES 4.

Jones – v- Daniel (Page 19: Gulshan s & Kapoor)

An offer to buy a property was accepted upon a condition that the buyer signed an agreement which contained special terms as to the payment of the deposit, making out title completion date, the agreement having been returned unsigned by the buyer.

APPENDICES 5.

Adams – v- Lindsell (1818) Arcos (Page 742: Making the contract: English Law Text and

Cases: Smith and Keenans)

‘The rule began with this case where wool was offered for sale, an acceptance by post was

requested and sent, but not received until long after the wool had been sold.’

APPENDICES 6.

Felthouse – v- Bindley (1862) Arcos (Page 739: Making the contract: English Law Text and

Cases: Smith and Keenans)

‘In Felthouse -v- Bindley (1862), the plaintiff wrote to his nephew offering to buy a horse for

£30, and “if I hear no more I consider the horse to be mine”. The nephew did not reply but

ordered Bindley, the auctioneer, to withdraw the horse from sale. In error the horse was

auctioned and Felthouse sued for his loss. The court held that, as the nephew had not

communicated his acceptance of the offer, no contract existed and Felthouse had no right of

action’

APPENDICES 7.

Errington – v- Errington & Woods (1952) (The company’s constitution and powers: Cases and

Materials in company law: 7th Edition: Ls Sealy)

‘A father bought a house and mortgaged it in his own name. He promised his son and

daughter-in-law that it would become theirs when they had paid off the mortgage. When the

father died and other members of the family wanted possession of the house their action

failed.’

APPENDICES 8.

Powell – v- Lee (1908)( The company’s constitution and powers: Cases and Materials in company

law: 7th Edition: Ls Sealy)

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‘The plaintiff applied for a job as a head teacher and the school managers decided to

appoint him. One of the managers, acting without authority, told the plaintiff he had been

appointed. The plaintiff sued for breach of contract. It was held that the plaintiffs offer had

not been officially accepted and so there was no contract.’

APPENDICES 9.

Bryne –v – Van Tienhoven (1880) (The company’s constitution and powers: Cases and Materials

in company law: 7th Edition: Ls Sealy)

‘On 1 October the defendants in Cardiff posted a letter to the claimants in New York offering

to sell them tin plate. On the 8 October the defendants wrote revoking the offer. On 11

October the claimants received the defendants offer and immediately telegraphed their

acceptance. On 15 October the claimants confirmed their acceptance by letter. On 20

October the defendant’s letter of revocation reached the claimants who had by this entered

into a contract to resell the tin plate.’

APPENDICES 10.

Adam – v- Lindsell (1818)( The company’s constitution and powers: Cases and Materials in

company law: 7th Edition: Ls Sealy)

‘The defendants were wool dealers in business at St Ives, Huntington. By letter dated 2

September they offered to sell wool to the claimants who were wool and manufacturers at

Bromsgrove, Worcestshire. The defendants’ letter asked for a reply ‘ in course of post’ but

was misdirected, being addressed to Bromsgrove , Leicestershire. The offer did not reach

the claimants until 7pm on 5 September. The same evening the claimants accepted the

offer. This letter reached the defendants on 9 September. If the offer had not been

misdirected, the defendants could have expected a reply on 7 September, and accordingly

they sold the wool to a third party on 8 September. The claimants sued for breath of contract’

APPENDICES 11.

Butler Machine Tools LTD – V- Ex-Cell-O (1979) (The company’s constitution and powers: Cases

and Materials in company law: 7th Edition: Ls Sealy)

‘On the 23 May 1969 Butler quoted a price for a machine took of £75,535, delivery to be

within 10 months of order. The quotation gave terms and conditions which were stated

expressly to prevail over any terms and conditions contained in the buyer’s order.One of the

terms was price variation clause which operated if costs increased before delivery. Ex-cell-o

ordered the machine on 27 May 1969, its order stating that the contract was to be on the

basis of Ex-Cell-O’s terms and conditions as set out in the order. These terms and

conditions did not include a price variation clause but did contain additional items to the

Butler Quotation, including the face that Ex-Cell-O wanted installation of the machine for

£3,100 and the date of delivery of 10 months was changed to 10 – 11 months. Ex-Cell-O’s

order form contained a tear off slip which said: ‘Acknowledgement: please sign and return to

Ex-Cell-o’s. We accept your order on the terms and conditions stated therein – and

undertake to deliver by .. date..signed’ This slip was completed and signed on behalf of

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Butler and returned with a covering letter to Ex-Cell-O on 5 June 1969.The machine was

ready by September 1970 , but Ex-Cell-O could not take delivery until November 1970

because it had to rearrange its production schedule. By the time Ex-Cell-o took delivery,

costs had increased and Butler claimed £2,892 as due under the price variation clause. Ex-

Cell-O refused to regard the variation clause as a term of the contract. ‘

APPENDICES 12.

Re Mcardle (1951) (Page 749: Making the contract: English Law Text and Cases: Smith and

Keenans)

‘certain children are were entitled under their fathers will to a house, However their mother

has a life interest in the property and during her lifetime one of the children and his wife

came to live in the house with the mother. The wife carried out certain improvements to the

property, and, after she had done so, the children signed a document addressed to her

stating: ’in consideration if your carrying out certain alterations and improvements to the

property..at present occupied by you, the beneficiaries under the Will of William Edward

McArdle hereby agree that the executors, the National Provincial Bank Ltd.,...Shall repay to

you from the said estate when so distributed the sum of £488 in settlement of the amount

spend on such improvements…’ on the death of the testator’s widow the children refused to

authorise payment of the sum of £488,and this action was brought to decide the validity of

the claim’

APPENDICES 13

Stewart – v- Casey (1892) (Page 749: Making the contract: English Law Text and Cases:

Smith and Keenans)

‘Patents were granted to Stewart and another in respect of an invention concerning

appliances and vessels for transporting and storing inflammable liquids. Stewart entered into

an arrangement with Casey, whereby Casey was to introduce the patents. Casey spent two

years ‘pushing’ the invention and then the joint owners of the patent rights wrote to him as

follows: ‘ in consideration of your services as the pratical manager working both patents we

hereby agree to give you one-third share of the patents’ Casey also received the letters

patent. Sometime later Stewart died and the executors claimed the recovery of the letters

patent from Casey, suggesting that he had no interest in them because the consideration for

the promise gave him a one-third share was past’

APPENDICES 14

Rose –v – Crompton (1925) (Page 759: Making the contract: English Law Text and Cases:

Smith and Keenans)

‘In 1913 the claimant an American Company, entered into an agreement with the defendant,

an English company, whereby the claimant was appointed sole agent for the sale in the USA

of paper tissues supplied the defendant. The contract was for a period of three years with an

option to extend the that time. The agreement was extended to March 1920, but in 1919 the

defendant terminated it without notice. The defendant had received a number of orders for

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tissues before the termination of the contract, and it refused to execute the. The claimant

sued for breach of contract and for non-delivery of the goods actually ordered. The

agreement of 1913 contained an ‘honourable pledge clause’ drafted as follows: ‘this andum

written as a formal or legal agreement and shall not be subject to legal jurisdiction in the

courts of the United States of America or England…’ it was held by the House of Lords that

the 1913 agreement was not binding on the parties, but that in so far as the agreement had

been acted upon by the defendant’s acceptance of orders, the said orders were binding

contracts of sale. Nevertheless, the agreement was not binding for the future,

APPENDICES 15

Jones – v- Vernon Pools (1938) (Page 758: Making the contract: English Law Text and

Cases: Smith and Keenans)

‘The claimant said that he had sent the defendants a football coupon on which the penny

points pool was all correct. The defendants denied having received it and relied on a clause

printed on every coupon. The said clause provided that the transaction should not ‘give rise

to any legal relationship…or be legally enforceable..but..binding in honour only’. The court

held this clause was a bar to any action in a court of law.’

APPENDICES 16

Dunlop Pneumatic Tyre Co LTD – v- Selfridge and Co LTD (The company’s constitution and

powers: Cases and Materials in company law: 7th Edition: Ls Sealy)

‘In the contract Dew & Co, wholesalers, agree to buy tyres from Dunlop. They did so on the

express understanding that they would not sell below certain fixed prices. They also

undertook to obtain the same price fixing agreements from their clients. Dew sold tyres on to

Selfridge on these terms but Selfridge broke the agreement and sold tyres at discount

prices. Dunlop sought an injection. They failed for lack of privity.’

APPENDICES 17

Barton – v- Armstrong (1975) (The company’s constitution and powers: Cases and Materials in

company law: 7th Edition: Ls Sealy)

‘A former chairman of a company threatened the current managing director with death

unless the managing director paid a large sum of money for the former chairman’s shares. It

was shown in the case that the managing director was actually quite happy to buy shares

and would have do so without the threats Nevertheless they had been made and were

therefore sufficient to amount to duress vitiating the agreement they had reached as a result.

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APPENDICES 18

D&C –v – Rees (Page 206: Shears 1998)

‘The builders’ promise to accept £300 in full settlement of a debt of £482 was not binding on

them, and they could successfully sure for the balance.’

APPENDICES 19

Spice Girls LTD – v- Aprilia World Services BV (Page 90: Richards, Dransfield & Goymer

2010)

‘Spice Girls Ltd (SGL) was formed to promote the band the Spice Girls. At the beginning of

May 1998 SGL entered into a contract with Aprilia World Service BV, an Italian company

which manufactures motorcycles and scooters. The Spice Girls agreed to take part in a TV

commercial advertising the scooters. The contract was signed at the beginning of May and

Geri Halliwell left the group at the end of May. A month before the contract was signed Geri

had told the group that she would be leaving the band The group did not disclose this

information to Aprilia World Service BV and the contract was signed. The Spice Girls went

ahead with the shoot even though they knew Geri would have left by the time the

commercial went on air.’

APPENDICES 20

Hedley Bryne & Co LTD – v- Heller & Partners (1964) (Page 90: Richards, Dransfield and

Govmer 2010)

‘Hedley Byrne & Co, an advertisement agency, needed financial advice on a particular companies standing and approached the company’s bankers, Heller & Heller Partners, for credit information. The defendants stated that the company was financially sound. A short time later, the company went into liquidation.’