Contract Law Assessment Answers Term 1 PDF

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Module Code : LA4015 1920 (T1) 1. The legal issue between Riya and Tim it is based upon whether Tim provided any kind of acceptance towards Riya’s offer of selling him her product. As we know, the acceptance of an offer represents the unequivocal expression of agreeing to all the terms of the other party’s offer. Riya made him an offer and specifically stated that Tim must get back to her with an answer by Friday. Later that week on Wednesday, Tim tried to reach Riya in order to express his acceptance towards her offer but he could not get through to her. It can appear at this point that Tim, by phoning Riya, was ready to accept her offer. His simple intention of completing this act in order to form and complete a contract between them, cannot pass as acceptance.The general rule is that acceptance must be communicated to the offeror, as mere silence will not be sufficient to conclude a contract. Later on, Tim wrote Riya a letter, informing her that he was willing to buy the tablet.The letter was due to arrive in Riya’s possesion on Friday ( when she specifically told Tim that he has to get back to her with an answer). Although Tim sent the letter by first class post, it did not arrive in Riya’s possesion until Saturday afternoon. In Adams v Lindsell (1818), we can see how the acceptance response came too late as well, making us wondering if the post is really a proper method of communicating acceptance. The postal rule of acceptance makes the contract take effect when the letter of acceptance is posted. The limits of the rule are that the rule should be applied when the post is used in order to communicate the acceptance. Riya was not aware of the fact that Tim wants to use the post in order to give her his answer, as they did not made the offer using this way of communication in the begining, so she can not be legally bounded with Tim for selling him the tablet. In Henthorn v Fraser

(1892) was held that „the post should be used within the parties contemplation”. Riya had the right to sell the tablet to somebody else by the time the letter came into her possesion, as no acceptance of her offer was communicated towards her on time. In conclusion, Tim, although he tried, did not gave Riya his answer by the time they both agreed of doing so. Tim cannot claim anything against Riya, as she respected her word of not selling the tablet to somebody else untill Friday. If Riya would have told Tim that he must inform her personally by Friday, it would have been different, as Tim would not have used the post in order to inform Riya of his decission, and he would have tried in repeated times to get through to her by phone to tell her his answer.

2. The legal issue between Ahmad and Shamima it is based upon whether Ahmad provided any kind of consideration towards a set of things Shamima has done over a period of time for Ahmad. The main problems relies upon past consideration and the payment in full of an old debt. Consideration represents the evidence of the existence and seriousness of the promise. Each party must gain something from the agreement, and therefore, each party must part with something, in order of an exchange of things with value to be completed. In the first part, Shamima, who was an interior designer, agrees to become the house sitter for Ahmad who had to go away. Shamima enjoyed staying so much that she decided to redecorate the bedrooms. When Ahmad returned, he promised Shamima 1000 pounds for the work she has done to his house. Shamima cannot claim any damages from Ahmad because what she provided towards Ahmad was past consideration, which it does not represent good or

valid consideration. Ahmad did not asked Shamima to redecorate his bedrooms, so no offer nor acceptance was provided before any kind of consideration from Shamima. Shamima tried to use an act from the past to enforce a promise made after the act. She cannot sue. In the second part, the two are dealing with the payment of an old debt, as Ahmad, asks Shamima to borrow him 200 pounds as a short term loan which was due to be repaid in one month. The loan was not paid on time so Shamima agreed to receive 100 pounds in full settlement of the loan with the condition of Ahmad to drive her to London. The rule in Pinnel’s Case (1602) states that „ payment of a lesser sum on the day in satisfaction of a greater sum cannot be satisfaction of the whole”. Under the commom law, all debts are repayble in full, as the debtor (Ahmad) has provided no consideration for the creditor’s (Shamima) promise to accept less than the full amount that she was owned. At this point, she could sue him for not providing any kind of consideration towards her letting him pay only half of the sum he was owning her, but her request towards Ahmad to drive her to London changes everything. When Ahmad agreed to take Shamima to London, he provided consideration towards her promise, as he came up with an evidence of the existence and seriousness of the promise. Ahmed’s consideration changes the problem of the part-payment of a debt in full settlement into a common law exception to the rule in Pinnel’s Case. The exception says that „payment of a lesser sum than that owned, in full settlement, plus for example goods” can be granted as consideration from the debtor towards the creditor’s promise, when the creditor requests it . In conclusion, Shamima cannot sue Ahmad for not giving her the 1000 pounds promised for the decoration, nor for the 100 pounds outstanding on the loan.

3. The legal issues between Dinaz and Phill are based upon whether Dinaz made any kind of misrepresentation towards Phill when she decided to sell her bookshop to him. A statement made during contractual negotiations may be a mere puff, a representation, or a contractual term. The essence of a representation is that the maker asserts the truth of certain facts and this operates to induce the contract. If the representation turns out to be a false statement which misleads and induces the other party to enter into a contract, than the false statement represents a misrepresentation. In the first part, Dinaz advised Phill, a potential buyer, that the annual profits were around 80,000 pounds per annum, based on the last five years bussines accounts. Dinaz invited Phill to check the accounts but Phill decided that her mere word could be trusted. After the contract was signed, Phill found out that the profits were about only 40,0000 pounds. Based on the general rule, Dinaz’s induced false statement of fact must have had the effect of inducing Phill to enter into the contract, in order to be counted as misrepresentation. Dinaz invited Phill to check the accounts but he refused, which means that her statement did not acted upon his mind to enter into the contract. As it was held in Redgrave v. Hurd (1881) by Jessel MR : „If a man is induced to enter into a contract it is not sufficient to say > I take it to be a settled doctrine of equity.” Based on this judgement, Dinaz did not commited any kind of misrepresentation towards Phill, although the argument in favour of apportioment is that the buyer has no obligation to investigate.

In the second part, Dinaz found out that the university near her bookshop, from where she received most of her incomes, was shut down due to funding problems. Dinaz failed to reveil this information to Phill. As it was held in Fletcher v. Krell (1873), the general rule is that silence cannot amount as misrepresentation because there is no statement. But this legal issue covers an exception, which is the failure to disclose a change in circumstances. As it was held in With v. O’Flanagan (1936), if a representation which induced the purchaser to enter the contract becomes false and the representor is aware and fails to correct it, it becomes a misrepresentation. Here Dinaz was aware so she made a misrepresentation. In conclusion, regarding the annual profits Phill cannot seek any kind of remedies, Dinaz’s misrepresentation could have passed as being fraudulent but in fact, it was not. He cannot seek the rescission of the contract because the contract it must have been rescinded within a reasonable time of the inocent party to become aware of the misrepresentation. As regarding Dinaz’s failure to disclose the change in circumstances, she is guilty of a negligent misrepresentation ( she is unable to prove she had reasonable grounds to believe that the closed university will not affect the bussines at the time the contract was made). Phill, as in the first issue, cannot seek rescission of the contract because it is too late.

SECTION B

The intention of creating legal relations represents the base of any contract made between two parties. An intention to create legal

relations can decide if the agreement made between the parties is enforceable regarding the contractual law or not. In order to be able to confirm an agreement, the parties must be aware of their individual capacity to contract, as not any kinds of agreements have the judicial power to form contracts. Regarding the capacity of creating legal relations in domestic and social agreements, the law has always presumed that such things cannot interfere or be understood as actual business matters in families. The explanation behind this reasoning is that ordinary arrangements and agreements are made every day between two spouses, without contracts being signed in order to enforce a promise made towards one onother, and as Atkin LJ stated „the agreements follow from natural love and affection which counts for so little in these cold courts”, most of the agreements are outside the courts jurisdiction. But in various situations, influenced by the kind of relation between the spouses, an intetion to create legal relations can be proved, if the aim is based on clear evidence of objective intention. On one hand, as Atkin LJ stated in the case of Balfour V. Balfour (1919) : „... it is the natural and the inevitable result of the relationship of husband and wife, that the two spouses should make arrangements between themselves[...] to my mind those agreements, or many of them, do not result in contracts at all, and they do not result in contracts even though there may be what as between other parties would constitute consideration for the agreement.” Out of this reasoning, it can be understood that as in Balfour V. Balfour (1919), where two spouses who were living in amity, who had to be separated due to the wife’s ilness, and who had an oral agreement regarding a monthly payment from the husband to his wife in consideration for her agreeing not to ask for further payments regarding her maintenance, the intention to perform precisely in order to avoid a probability of being sued upon later never occured, as at the time the oral agreement was made, the

couple was not estraged. The presumption that there is no intention to create legal relations in domestic agreements stands, as no clear objective evidence from any of the parties could be shown, none of them wanting at the begining of the oral agreement to enter expressly in a legal relation. The nature of the relation between the individuals is the key of finding out if the mutual intention was of creating an agreement with a judicial importance or not. The principle of the inexistence of the legal relations in domestic situations is explained by Atkin LJ when giving the reasoning for the Balfour V. Balfour (1919) case, as it follows: „... The terms may be repudiated, varied or renewed as performance proceeds or as disagreements develop, and the principles of the commom law as to exoneration and discharge and accord and satisfaction are such as find no place in the domestic code [...] It appears to me to be plainly established that the promise here was not intended by either party to be attended by legal consequences [...] I think the onus was upon the plaintiff, and the plaintiff has not established any contract. The parties were living together, the wife intending to return.” In this case it is stated very clearly how both consideration and the intention to create legal relations are vital when entering a contract, so as long as there is no sign of existence of such parts of a contract, the presumption that there is no intention to create legal relations for social and domestic agreements cannot be rebutted. On the other hand, when the terms of the agreements are sufficiently certain in order to be able to enforce them, the language will indicate if the there was an intention to create legal relations or not for domestic and social agreements. As it was stated before, the nature of the relationship of the individuals is very important as well ( if they are living in amity or not), when the time of finding if there was a contract between them or not comes. As long as it cand be proved that the intention to create legal relations is very clear and objective, the presumption that it is inexistence in such contexts can

be rebutted. In the case of Meritt V. Meritt (1970) it is demonstrated very clearly how the presumption can be rebutted, if the agreement between husband and wife, made in a business context, is sufficiently certain. Here, the couple was not living in amity, as the husband left his wife. The two were paying an mortgage together, but when the husband left his wife, he signed her an wrriten note where he stated that he will pay her the sum of 40 pounds each month to pay the outstanding mortgage payments on the house, in return of her consideration of paying all the household charges. When the mortgage will have been paid, then the husband will transfer the house to his wife. When the wife paid off all the mortgage, the husband refused to transfer the house. The presuption can be rebutted, as the note signed by the husband to his wife, with whom he did not had a good relation, was intended to create legal relations between the parties , as no amity was between them. The explanation of the rebutted presuption it is given by Lord Denning MR as it follows : „ The first point taken on his behalf by the counsel for the husband is that the agreement was not intended to create legal relations. It was, he says, a family arrangement such as was considered by the court in Balfour V. Balfour (1919). So the wife could not sue upon him. I do not think those cases have any application here. The parties there were living together in amity. In such cases, their domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honourable understandings. They want everything cut and dried. It may safely be presumed that they intend to create legal relations.” In summary, the presumption that there is no intention to create legal relations for social and domestic agreements cannot be rebutted, as long as the parties involved cannot make a clear distinction between ordinary arrangements and agreements, and

legal documents with judicial power. The presumption also stands, as long as the nature of the relation at the time the agreements were made was a good one, and the couple was not estranged, nor separated or about to separate. At the same time, the presumption can sometimes be rebutted, as long as a number of factors are kept in mind when deciding if between the parties was or it was not an intention of creating legal relations. The language must be very objective and the terms must be sufficiently certain in order to be able to enforce a contract in social and domestic situations. Also, the presumption can be rebutted when the nature of the relation it is not of good communion and the couple is not living in amity, they are separated or about to separate. In such cases, it is easier to prove that the parties were intending to create real legal relations, and their arrangements and agreements were not ordinary. In the final analysis, I agree the statement is true to a certain extent, as the presumption involves certain factors that must be taken into account. It cannot be rebutted as long as the parties are not aware or do not intend to be attended by legal consequences. As Atkin LJ stated when giving the reasoning in Balfour V. Balfour (1919) : „...To my mind it would be of the worst possible example to hold that agreements such as this resulted in legal obligations which could be enforced in the Courts.” But as it could be seen, certain situations require certain ways of dealing with the existence of a legal relation in domestic and social agreements, and one way of being possible to rebut the presumption stands in the nature of the relation between the parties. If the parties are estranged, the intention of creating legal relations between them is real because as stated before by Lord Denning MR in Meritt V. Meritt (1970) : „They do not rely on honourable understandings. [...] It may safely be presumed that they intend to create legal relations.”...