W300

Law: Agreements, Rights and Responsibilities

TUTORIAL FIVE

Saturday 18th February 2017

10.00 – 13.00

Reading College

  1. INTRODUCTION (5 minutes)
  1. FEEDBACKeTMA03 (15 minutes)
  1. EXCLUSION CLAUSES (60 minutes)
  1. BREAK (10 minutes)
  1. DISCHARGE AND REMEDIES (60 minutes)
  1. INTRODUCTION TO AVOIDING CONTRACTS (20 minutes)
  1. QUESTIONS ONeTMA04 (5 minutes)
  1. CONCLUSION (5 minutes)

INTRODUCTION

  1. Objectives:
  • Consider a practical example of how statutorily implied terms operate and the regulation of attempts to exclude liability.
  • Explore contract remedies further.
  • Introduction to ways of escaping a contract such as misrepresentation.
  • Look aheadto eTMA04.
  1. Questions?
  1. Problems with the module so far other than eTMA03?

FEEDBACK ON eTMA03

EXCLUSION OF LIABILITY

  1. Introduction

a)Identify the contract (very briefly if obvious)

Who makes the offer? Is there an invitation to treat?

Who makes the acceptance and in what form is this made?

What is the consideration and how does it pass?

Is there an intention between the parties to create legal relations?

b)What are the express terms?Are there any implied terms?

c)Are there any exclusion clauses?

d)If so look to whether they have been properly incorporated and then the validity of the exclusion so far as the contract itself, statute and common law are concerned.

e)Does CRA 2015 or UCTA 1977 apply (consumer or business contract?). Is the clause void or, if applicable, does it satisfy the reasonableness/fairness requirements?

f)What type of terms have been breached (conditions, warranties or intermediate) and what loss, if any, has been suffered?

g)Finally, what remedies may be available?

Problem Question

Shamla runs a small firm engaged in the manufacture of jams and preserves. She has come to you about a recent problem she has had with one of her long standing customers, Terry.

On 1st June, Terry ordered a large consignment of jam for use in his hotel. Shamla’s employee, Jeremy delivered the consignment on 6th June but, as he was backing his lorry into the delivery area, he hit a door causing £1,000 worth of damage. A week later, Terry telephoned Shamla to complain about the damage. He also told Shamla that when he opened several of the jars of jam, he found they had gone slightly mouldy and that he wanted Shamla to replace the whole consignment.

Shamla gives you a copy of the delivery note which Jeremy handed to Terry when he delivered the consignment. On the back in small print are a number of clauses including the following:

(iii)Neither the Sellers nor their employees will be liable for any damage howsoever caused.

(iv)The Sellers will not be liable for defective goods unless the Buyers notify the Sellers of the defect within two days of delivery.

Advise Shamla and Jeremy as to their respective rights and liabilities.

  1. For group discussion.

a)Is there a contract between Terry and Shamla and if so what are the terms?

b)Has Shamla effectively excluded liability?

  • Is the document contractual in nature?
  • What are the express terms and are there any implied terms?

c)Consider incorporation.

  • Signature.
  • Notice.
  • Nature of the document itself.
  • Degree of notice.
  • Timing of the notice
  • Course of dealing

d)Consider construction at common law

e)Statutory controls.

BREAK

DISCHARGE & REMEDIES

  1. Discussion on available remedies and methods by which a contract can come to an end:
  1. Discharge can be by:
  1. Performance.
  2. Agreement between the parties.
  3. Frustration.
  4. Breach.
  1. Remedies include:
  1. Liquidated damages.
  2. Unliquidated damages.
  3. reliance loss, or
  4. expectation loss.
  5. Specific performance.
  6. Injunctions.
  7. Restitution.
  1. Group work – Consider the problem question overleaf.

Problem Question 1

Rowena, a teacher in Guildford, decided to change her job. Just before Easter, she went for an interview to a school in Yorkshire and was offered a position starting in September. She gave one terms notice to her employers, SurreyCounty Council, and set about selling her house.

She wanted to sell quickly before the summer, and thought she was more likely to do so if the inside of her house was completely redecorated. She therefore approached Stella, who ran a small decorating business, to give her an estimate. Stella offered to do the whole job for £2,000, broken down as follows: £400 for the lounge, £400 for the kitchen/diner, £150 for the hall and staircase, £300 for each of the three bedrooms and £150 for the bathroom. The price included the cost of materials, and the job would take her about a fortnight. ‘Shall I pay you for each room when you’ve finished it?’ asked Rowena. Stella replied: ‘Don’t bother about that; just let me have £400 now and the rest when I have finished the whole lot. How about if I started on Monday week, that’s 12 April?’ Rowena agreed that 12 April would be convenient.

Stella started work on 12 April and worked for four days during which time she completed the lounge, the hall and staircase and started the kitchen/diner. On the fifth day, Stella rang up to say that she was abandoning the job as she had suddenly been given the opportunity to take her daughter on a three-month cruise.

Stella has been paid £400 but wants a further sum for the work she has already done. Rowena discovers that it will cost £1,400 to get someone else to finish the work.

Explain Rowena’s legal position.

TIPS:

  1. Consider whether there is a contract and the relevant terms. Was time of the essence?
  2. Is Stella in breach?
  3. Was Stella entitled to abandon the contract?
  4. What can Rowena do?
  5. Can Rowena terminate the contract?
  6. What is the most common remedy for breach of contract?
  7. Can Rowena force Stella to return the £400 already paid?
  8. Can Stella recover any monies for the work she has done?
  9. How much will Stella be entitled to?
  10. Conclusion?

Problem Question 2 (time permitting)

Livlonga Hearts are a much prized award in the health club industry. Only about one in five health clubs get them. Being awarded a Livlonga Heart generates lots of custom and enables premium prices to be charged. Some health clubs are even able to double their profits.

Tiptop Triceps Limited (“TTL”) run a health club in Southampton, which makes a weekly profit of about £1,000. They recently closed it for refurbishment, to prepare for a visit from the Livlonga Hearts inspectors. As part of this, they contracted with Pressup Electrics of Portsmouth (“PEP”), to rewire the premises and install a new lighting system.

TTL explained how important it was to have the health club in good shape for the inspection, and insisted on the following clause being included in the contract:

“In the event of PEP causing any delay to the re-opening of the premises, PEP agrees to pay TTL £2,000 per week by way of compensation for loss of profit.”

The refurbishment was proceeding well until one of PEP’s employees carelessly mixed up the lighting and air-conditioning fuses. This allowed an excessive electric current to pass through the lighting circuit, starting a small fire.

Unfortunately, TTL’s gym manager had disconnected the sprinkler system, because he was tired of getting wet whenever there were false fire alarms. As a result, the fire took hold, and the entire gym building was destroyed. The cost of rebuilding will be around £300,000, which will cover the replacement costs of the building, the replacement of six brand new multigym sets, and the replacement of five cross-trainers which were about half way through their working lives.

In addition, all of the paperwork being prepared by TTL for the annual “Skate Chase” event has been destroyed. The Skate Chase is a popular event, run on Southampton Common, where athletes from Southampton chase a large plastic skate fish around the Common for as long as possible until they catch it and throw it in the lake. The paperwork itself is of no value, but TTL will no longer be able to participate in the Skate Chase – an event where they have in previous years always signed up £5,000 worth of new business. PEP say they have never even heard of the Skate Chase.

TTL’s health club will now have to be closed for a further six months. The visit of the Livlonga Hearts inspectors has been postponed, and such is the demand for their services, that they will not be able to inspect the health club for another two years.

Advise TTL as to the damages they may be able to recover from PEP.

AVOIDING CONTRACTS

  • MISREPRESENTATION
  • Criteria.
  • Representation or term of the contract?
  • Induced contract?
  • Untrue or false?
  • Is it material?
  • Remedies.
  • Rescission, but note the bars to rescission
  • Affirmation
  • Lapse of time
  • Third party rights
  • Restitution possible
  • Damages.
  • Tort of Deceit.
  • Hedley Byrne.
  • S2(1) Misrepresentation Act 1967.
  • Innocent misrepresentation – no damages, can claim indemnity.
  • S2(2).
  • DURESS AND UNDUE INFLUENCE
  • Duress.
  • To the person- threat or actual violence.
  • To goods.
  • Economic duress.
  • Compulsion of the will.
  • Illegitimate pressure.
  • CTN Cash and Carry – lawful threat could be duress.
  • Atlas Express – lack of consideration.
  • Williams and Roffey Bros – legitimate commercial pressure.
  • Undue Influence.
  • An equitable doctrine – voidable contract rather than damages.
  • Actual.
  • Presumed.
  • Certain relationships.
  • Transaction explained.
  • Presumption rebuttable if full disclosure, adequate consideration or independent advice given.
  • Third parties – banks.
  • BB Bank and O Brien (1993).
  • RBS v.Etridge (2001).
  • FRUSTRATION

Introduction.

  • Frustration comes into play once you have established a contract and considered all the terms but where either or both parties say they cannot perform their part.
  • Some issues.
  • Explain your understanding – what is the basic principle? Paradine v. Jane.
  • What is meant by frustration – use caselaw to build up definition such as Krell v. Henry etc.
  • Consider policy reasons for the courts approach in certain cases and how the courts look at significance of obligation.
  • Consider the Law Reform (Frustrated Contracts) Act 1943 and how loss is distributed.
  • Conclusion.

PREVIEW OF eTMA04

eTMA04 – Due 15th March 2017.

  • Points of interest.
  • Exclusion Clauses– Problem question.

Questions?

CONCLUSION

Final queries.

What have we achieved today? Refer to introduction.

  • Review of objectives.
  • We explored implied terms in contracts and the effect of common law and statutory provisions in regulating exclusion of liability.
  • We looked at remedies in contract.
  • We looked ahead at ways of escaping from a contract i.e. ways of getting out of a contract altogether – misrepresentation, duress, undue influence, frustration and also on what happens when a contract comes to an end.
  • Next time we will look at the circumstances under which employers can be liable in tort, for what they have done or failed to do, as well as for what others have done or failed to do. We will also look at other statutory torts and specific relationships.

Next tutorial – 1stApril 2017.

Thank you for coming.

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