LGST101 Commercial Law

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LGST101 Commercial Law

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LGST101 Commercial Law

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Course Code: LGST101
University: Singapore Management University

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Country: Singapore

Question:
Describe the Commercial Law For the Valid Contract.
Answer: 
Introduction

A contract may be defined as an agreement made between parties with the intention of creating legal liabilities. This is essentially because when there is a legal liability under the terms of an agreement, such agreement becomes enforceable at a Court of law ((Knapp, Crystal & Prince, 2016). A contract is valid and enforceable in a Court when it comprises of the following essentials:

Offer
Acceptance
Intention
Capacity
Consideration

When a valid offer has been made by a person competent to make such offer (offeror) to another person who is competent to accept such offer (offeree) and such other person accepts the offer, that agreement takes the form of a contract. Both the parties to a contract must have a consideration that is valid in the eye of the law (McKendrick, 2014). 
Issue
The issues in question are mentioned below:

Is there a valid contract existing between the parties?
If yes, when did the contract come into existence.

Rules
Offer
An offer may be made by a person, who is referred to as the offeror to another person, general public or to a group either expressly or impliedly. In the case of Harvey v Facey, [1893] UKPC 1, the learned Justice opined that a valid offer must have the intention of binding the offeree legally (Ayres & Schwartz, 2014). Hence, in order to conform to the essentials of a binding contract the parties must prove that they intended to legally bind each other to the terms of the contract.
An offer and an invitation to an offer are two separate concepts. An invitation to an offer is not legally binding. On the other hand, an offer is legally binding. An invitation to an offer may be effectively defined as an expression made by one person to another, to induce the latter to make an offer. The idea of an invitation to an offer has been has been discussed exhaustively in Fisher v Bell [1961] 1 QB 394.
Fon an offer to be regarded as valid, it must be complete. The offer must comprise of all the essential elements like intention, time, description and price of goods or services. This concept has been effectively laid down in the landmark case of Partridge v Critenden (1968) 2 All ER 425.
The offeror may rescind his offer at any time before such offer has been accepted. This idea has been thoroughly and exhaustively discussed in Dickinson v Dodds (1876) 2 Ch. D. 463. Furthermore, this landmark case also lays down that once an offer has been rejected, such offer cannot be accepted subsequently.
A counter offer comes into existence when the offeree does not accept the original offer made to him by the offeror, but effects certain modifications to the terms of the offer. Once the counter offer has been rejected by the offeror, it may not be subsequently accepted. The essentials in respect of a counter offer have been provided in Hyde v Wrench 1840 49 ER 132.
Acceptance
The moment a competent party accepts the offer in a valid way, there comes into existence a binding agreement. The essential elements of a lawful acceptance is mentioned below..
Firstly, the offer must be accepted by the offeree and conveyed to the offeror in a way that has been laid down by the offeror.
Secondly, the terms of the offer must be accepted by the offeree in their original form. When any modification has been made to the original offer, it does not count as an acceptance but a counter offer (Poole, 2016).
Thirdly, there should not be any ambiguity in the terms and the language of the agreement.
The essential concept of acceptance has been discussed in Entorres v Miles Far East [1955] 2 QB 327. This precedent lays down that an acceptance become binding once it has been received.
When a situation arises that the parties are of the opinion that post is an effect mechanism of communication or does not expressly stipulate that post is not a suitable mode of communication, the postal rule applies. The postal rule lays down that an acceptance is binding as soon as the duly addressed and stamped letter of acceptance has been posted by the offeree. This concept has been reinforced in Adam v Lindsell (1818) 106 ER 250.
Consideration
A consideration may be defined as a reasonable and valid promise. A consideration may not be just. Past considerations and considerations in respect of existing liabilities are not valid (Hunter, 2015).
Intention
When the parties to an agreement does not intend to legally bind each other to the terms of the agreement, a contract does not come into existence (Austen, 2017). The precedent of Hyde v Wrench lays down an objective test that is used by the court in ascertaining parties’ intentions Capacity.
For a person to be eligible to enter into a valid contract, such person must be a major and of a sound mind (Rakoff, 2016). 
Application
The rules mentioned above are to be effectively applied to the present case. The facts of the case lays down that a valid offer has been made by Alan. Alan has prescribed the date till the offer is valid, the mode and price of acceptance and the description of the goods in his offer.
An offer can only be accepted by the person to whom the offer has been made. A third person is not bound by the offer. Damien has no right to accept the offer as Damien is not present in Alan’s friend list and the offer expressly stipulates that it is meant for Alan’s friends. Therefore, no valid offer has been made to Damien by Alan and no contract exists. However, the SMS sent by Damien to Alan may be referred to as an invitation to an offer. Alan accepted this invitation to an offer and agreed to sell the specified book at the price of $200. Damien gave Alan $200 as price for the book on the 4th of November, thereby accepting the offer.
Two essential causes may be cited as to the reason for the non-existence of a valid contract between Alan and Charleen. Firstly, Charleen does not have the capacity to anter in to a contract as her age is 16. Secondly, Alan was thinking of something else when he accepted Charleen’s offer. Hence, Alan did not intend to legally bind Charleen.
Bernard said that he intended to buy the book for $150. Alan had Bernard in his friend list. As per the rule of acceptance, this resulted in a counter offer and not an acceptance. The original offer was terminated the moment the counter offer was made. Alan made a fresh offer when he said that he intends to sell the specified book for $200. This offer was accepted by Bernard the moment he posted the letter of acceptance on the 4th of November. Therefore, a valid contract was formed between Alan and Bernard on the 4th of November.
Conclusion
There was a contract of Alan with Bernard and Damien established on 4th November. No contract was established between Charleen and Alan. 
Issue
Legal position of Alan and Bernard in respect to the contract, to each other and remedies
Rule
The above discussion throws light into the fact that a valid contract exists between Bernard and Alan.
Parties are entitled to contractual remedies when the terms of a contract are breached. On the instance that the parties to the contract fail to deliver in respect of the terms of the contract, such parties become liable to pay damages and compensation (Fletcher &Spargo, 2016).
The remedies available to the parties when their rights in respect of the contract are violated are mentioned brlow:

Rescission
Specific performance
Damages
Repudiation
Injunction
Restitutionary awards 

In Addis v Gramophone [1909] AC 488, the court has essentially and effectively specified the rules in respect of compensation and damages. This precedent lays down that the compensation should be equal to what the party have lost and the amount of compensation must  be such that it restores the party to its original position if the contract was not formed or the contrace was not breached.
Application
Alan promised to provide his hand written notes in addition to the book through his offer. The contract between Alan and Bernard came into existence on the 4th of November. According to the terms of the contract, Alan was bound to provide his hand written notes in addition to the book. Subsequently, it was discovered that the specific book was available at free of cost. However, the rules of consideration lays down that the book was still a valid consideration. The cost of the book is immaterial. No claim for breach of contract can be claimed by Bernard against Alan as Alan has fulfilled his contractual obligations.
Conclusion
Alan is not liable for breach of contract. Bernard cannot claim any compensation. 
Issue
Damien and Charleen’s legal position
Rule
The facts of the case lays down that there has been no effective contract between Alan and Charleen
In the absence of any contract, contractual obligation and remedies does not arise (Stone, 2013).
Application
The contract between Alan and Charleen was void at inception as Charleen was incompetent to contract and Alan did not intend to create legal obligations. Alan did not intend to sell the bopok to Charleen. Charleen can request Alan to pay back the $200 that she laid on the table on moral grounds, provided that he had taken the cash. The cash should not be taken by Alan, as that would create a valid contract.
Conclusion
As there exists no valid contract, remedies are out of question. 
Issue
To identify the legal position of Damien and remedies
Rules
The rules in respect of remedies have been efficiently mentioned above.
A valid contract was formed on the 4th of November between Damien and Alan.
Application
According to the facts of the case, a valid contract existed between Damien and Alan. The terms of the contract said that Alan was to provide his hand written notes in addition to the book. However, Alan failed to provide the hand written notes and incorporated a few notes in the book instead. Therefore, it can be safely asserted that the contractual obligation has been breached by Alan.
A claim for specific performance of the contract may be claimed by Damien. This shall entitle him to the hand written notes. Damien may also make a valid claim for compensation and terminate the contract as the hand written notes were a significant condition of the contract.
Conclusion
Damien’s contractual rights has been breached and he is entitles to remedies. 
Three types of Alternative Dispute Resolution methods exist (Bix, 2017). They are discussed below:

Mediation- A neutral third party is appointed and assists the  parties in respect of the dispute in order to reach an effective settlement mutually

Advantage
Mediation is cost effective and saves time
No complex procedures need to be followed.
Disadvantages
The decision reached through mediation is not legally binding on the parties.
Does not involve any established process of discovery

Arbitration- An arbitrator is appointed to preside over the arbitration process. The Arbitrator determines the result of the dispute.

Advantages
Saves time and money
Statutes and precedents are consulted in reaching a decision.
Disadvantage
The decision of the arbitrator is independent.
It is expensive than the other ADR’s in comparison

Conciliation- A positive relationship and understanding is intended to be  established between the parties in dispute by a third party.

Advantages-
It is a flexible procedure in respect of structure, time and content
It is uncomplicated, fast and cost-effective
Disadvantages
It is not legally binding on the parties
An effective and efficient result is not guaranteed
Conclusion
The above discussion concludes that Alan has no obligations towards Charleen. In addition to this, Alan has fulfilled his contractual obligations towards Bernard. Alan is liable to Damien for breach of contract. Alan and Damien can effectively and amicably settle the issue by taking recourse to the diverse forms of ADRs.
References
Austen-Baker, R. (2017). Implied terms in English contract law. Edward Elgar Publishing.
Ayres, I., & Schwartz, A. (2014). The no-reading problem in consumer contract law. Stan. L. Rev., 66, 545.
Bix, B. H. (2017). 1. Theories of contract law. Comparative Contract Law, 7.
Fletcher, T., &Spargo, P. (2016). Uncertainty and risk: contract law. Without Prejudice, 16(6), 20-21.
Hunter, H. (2015). Modern Law of Contracts.
Knapp, C. L., Crystal, N. M., & Prince, H. G. (2016). Problems in Contract Law: cases and materials.
McKendrick, E. (2014) Wolters Kluwer Law & Business. Contract law: text, cases, and materials. Oxford University Press (UK).
Poole, J. (2016). Textbook on contract law. Oxford University Press.
Rakoff, T. D. (2016). The Five Justices of Contract Law. Wis. L. Rev., 733.
Stone, R. (2013). Q&A Contract Law 2013-2014. Routledge. 

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