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In the case of Winston Graham who is a partner in a large firm of Antique dealers, and Alan Daly who is the proprietor of Daly car sales ltd a commercial vehicle dealer who specializes in vans and light trucks, Antique dealers buy and sell large pieces of valuable furniture and they need a minimum of three vans to cope with regular deliveries and purchase of furniture in the course of their business. Unfortunately one of the firm's vans was written off in an accident and thus Winston was asked to find an urgent replacement immediately. On visiting Daly car sales ltd Winston spoke to the proprietor and outlined his requirements for an urgent replacement of a van which led them to engage in a contract of sale of goods.
A contract is a legally enforceable agreement between two or more parties with mutual obligations. The remedy at law for breach of contract is "damages" or monetary compensation. In equity, the remedy can be specific performance of the contract or an injunction. Both remedies award the damaged party the "benefit of the bargain" or expectation damages, which are greater than mere reliance damages, as in promissory estoppel.
A contract intends to formalize an agreement between two or more parties, in relation to a particular subject. Contracts can cover an extremely wide range of matters, which includes the sale of goods or real property, terms of employment of or an independent contractor relationship, dispute settlement, and ownership of intellectual property developed as part of a work for hire.
In common law the elements of a contract includes mutual consent and consideration thus mutual consent revolves around offer and acceptance while consideration includes sufficiency and other jurisdictions.
In order for two parties or more to contract a party must have capacity to contract, the purpose of contract must be lawful, the form of the contract must be legal, parties must intend to create a legal relationship and parties must consent.
Sale of goods:
A contract of sale of goods is a contract by which the Contract seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. (Sale of goods act 1979). Thus it's an agreement by which the seller agrees to transfer the property in goods to the buyer for a money consideration, called the price.
There may be a contract of sale between one part owner and another, hence making the contract of sale to be absolute or conditional. In a contract of sale where the property in the goods is transferred from the seller to the buyer the contract is called a sale, however in a contract of sale where transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell.
In the sale of goods act 1979 S 4.-(1) Subject to this and any other Act, a contract of sale may be made in writing (either with or without seal), or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties.
Sub section two also states that nothing in this section affects the law relating to corporations, hence this explains the following;
Implied and express terms:
An implied contract is one in which some of the terms are not expressed in words. It's an unwritten, unspoken contract, also known as "a contract implied by the acts of the parties," which can be either implied in fact or implied in law, and may also be legally binding. It is however important to note that contracts implied in law are also known as quasi-contracts and their remedy is quantum meruit, the fair market value of goods or services rendered.
Oral contracts are ordinarily valid making them legally binding. However, in most jurisdictions for certain types of contracts to be enforceable they must be reduced to writing. This is to prevent frauds and perjuries, For example, an unwritten contract would be unenforceable if for the sale of land.
Thus for express terms they must be stated by the parties during negotiation or written in a contractual document unlike implied terms which are not stated but nevertheless form provision of the contract.
The goods which form the subject of a contract of sale may be, goods to be manufactured or acquired by the seller after the making of the contract of sale, in this Act called future goods or they may be existing goods, owned or possessed by the seller.
In section 5 (2) and (3) of the Act, There may be a contract for the sale of goods the acquisition of which by the seller depends on a contingency which may or may not happen.
(3) Whereby a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.
The verbal negotiations:
In the conversation between Winston Graham and Alan Dalay, whereby Winston had given out requirements on a van that was needed to carry out business, Alan on the other hand the proprietor of the car dealer, by verbally informing Winston that he had the right vehicle for him meant that Alan had a van that matched the same properties and essentials that Winston wanted. This conversation was arguably attached to the status of misrepresentation as what was expected was not what happened.
Again under Section 13(1) where the buyer is sold goods by description, the goods must correspond with this description. In the case of Harlington v Christopher Hull it was held that this implied term may only be breached if the buyer relied upon the description. Therefore if the buyer is an expert, reliance may not be established, thus this conversation could have resulted into breach of contract as Winston relied on the description given to him by Alan.
AS Winston considers taking legal action against Daly car sales ltd it is in due process that the court includes this conversation as an express (verbal) term of contract as the terms were stated during negotiations and written in a contractual document whereby both parties read the document and signed it, thus this gives the buyer a possible argument on his behalf.
The buyer may argue on the basis of misrepresentation, whereby he relied on a false statement of fact that was made by the seller that induced him into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.
The oil leak and defective clutch:
S14 (2) of the Act provides that the quality of the goods sold must be satisfactory (prior to 1994, this provision required 'merchantable' quality; this requirement has been retained in most Commonwealth versions of the Act). The Act provides an objective test to determine satisfactory quality; the standard that a reasonable person would regard as satisfactory, taking into account the price, description and any other relevant factor.
Under the case of both Winston and Alan one can be guided by the following questions, was a commercial vehicle which had an oil leak and a defective clutch when sold, really of satisfactory quality? Was the vehicle reasonably fit for its ordinary purpose of being driven on the road bearing in mind the age, description, mileage, price and condition apparent on inspection?
After Mr. Winston conducted the inspection he noticed a small patch of oil on the forecourt where the court was standing, a week after delivery the driver confirmed oil leak and a defective clutch, later on it came to his attention that the van had brakes inadequacy and incapacity to handle the respective weight.
All this unsatisfactory qualities determine that the van was of poor quality, although this does not make the buyer loose the benefit of S 14 (2) by virtue of the clause relating to defects brought to buyers attention ,or defects which an examination of the goods should have revealed, this is because the buyer after inspection relied on the specific information that was given to him by the seller regarding the van and the rest were discovered after the contract was made enabling him to benefit under the Act.
The brakes/ the capacity:
On the assumption that the brakes only become inadequate when the van was loaded to a weight of 1 ton, then arguably, in respect of brakes, the van is of merchantable quality. However this may raise some questions provided in section 14 (3) of the Act.
Under the Act S14 (3) provides that If the buyer expressly or impliedly makes his purpose for the goods known to the seller, the seller is obliged to make sure the goods provided are fit for that purpose, if it is reasonable for the buyer to rely on the seller's expertise.
Thus Winston made it clear before the purchase of the van the purpose for which the goods were being bought, that the goods supplied under the contract were reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller or credit-broker.
The exclusion clause:
Section 14(b) of the standard document produced by Alan read as follows 'any warranty or condition as to the condition, descriptive, quality or fitness for particular purpose is hereby excluded from this contract for sale'.
This clause cannot defend the seller from liability because where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality taking account of any description of the goods, the price and all the other relevant circumstances.
Non consumer sale and consumer sale:
Consumer goods are ordinal type of goods supplied for private use or consumption, thus these goods are regarded to be in consumer use when a person is using them, or has them in possession for use, otherwise than exclusively for the purposes of a business, unlike Non -consumer goods which are exclusively for business purposes. (Unfair Contract Act 1977)
Since the purchaser Mr. Winston has proved to be non consumer due to the exclusive business to business dealings, the county court where the litigation process is to take place will probably consider this to be a no-consumer transaction and such a clause is "void subject to reasonableness" - in other words it is possible for the seller to pursued the court that the exclusion clause is reasonable and should stand.
This case study allows a limited discussion on remedies and thus the following emerge;
Rescission- It is the unmaking of a contract i.e. meant to bring parties back to the position in which they were before they entered the contract.
Damages - simply means payment of money. Duty to mitigate loss - the buyer must prove that he aggravated his loss in this case.