Level 5 BTEC Higher National in Business Unit 26: Common Law 1

Introduction

The inherent nature of contractual relationships puts into consideration the nature of relationships that persist between the business and consumers. The laws guiding thus contractual relations are the basic principles of business law. The paper will thus take a closer look at the main principles affecting the legal relationship between business organizations and their consumers applying the legal rules on implied terms relating to the sale of goods and supply of services (Gillies, 2004, 31). In addition, the paper will also touch on the statutory provisions on buyer’s and seller’s remedies and product liability statutory provisions. The paper will also substantiate why a consumer will have the right of returning an item to the buyer if it proves to be of unsatisfactory quality as well as breach of contracts and terms of a contract. Other areas not mentioned will be differentiated by subtitles and will be analyzed succinctly.

Body

Basics of Contracts between Businesses and Consumers

The imperative elements of a contract include an offer an acceptance. The elements are imperative even in contracts pertaining to businesses and consumers. The acceptable legal way of accepting a contract is through signing. The law has touched on the common understanding of the importance of a signature. The law takes some pragmatic approach to determine whether the offeree has accepted the contractual terms for contracts that do not need to be signed. An offer can also be accepted by conduct on by the party to which the contract has been offered. Section 41 of the Australian Consumer Law (ACL) protects unscrupulous companies from taking advantage of susceptible consumers by sending unsolicited goods to them (Gillies, 2004, 91). A contract must have an offer and an acceptance. In addition, parties to a contract ought to have an intention to create legal relations. Then again, same case is applicable to contracts between businesses and consumers which is the main subject of the paper. The paper will also cover the vital aspects of a contract which will be thoroughly discussed.

Breach of Contract between Businesses and Consumers

Whenever a contract has been breached, the law provides relevant remedies that depend on the remoteness of damage. A buyer automatically gets in enters in a contract with the seller if they buy goods from the seller. The consumer has the right of returning an item to the buyer if it proves to be of unsatisfactory quality. It will be the prerogative of a consumer to choose whether they will retain the commodities or will seek a refund by repudiating the contract so as to earn a refund. A buyer automatically gets in enters in a contract with the seller if they buy goods from the seller. The consumer has the right of returning an item to the buyer if it proves to be of unsatisfactory quality. In addition, whenever a contract has been breached, the applicable remedies will include but not limited to proponents of equity as well as common law.

Moreover, businesses ought to ensure that commodities being sold to consumers are fit for their intended purpose so as to avoid the breach of contract. This was also held in BSS Group Plc v Makers (UK) Ltd (t/a Allied Services) [2011] (Jones, 2013, 72). The commodities that will be subject to dealings between producers and consumers will comprise of personal chattels so long as they do not pertain to either action or money. However, according to the sale of goods Act, the goods which are the contract’s subject matter should only exist as goods that the seller owns or goods that the seller needs to manufacture or acquire after the formation of the contract. This may also be termed as future goods because they are not in immediate possession of the seller. In addition, according to Section 75 of the consumer Credit Act, business lenders need to obtain a license before perpetrating their lending activities to consumers. The license can be obtained from the office of fair trading (Jones, 2013, 92).

Conditions and Warranties between Businesses and Consumers

Conditions and warranties comprise of the innominate terms of a contractual agreement. The provisions for the innominate terms were created in the case for Hong Kong Fir Shipping. Conditions are basically the major and vital terms in the contractual agreement that go to the root of the contract (McKendrick, 2012, 113). In the event of a condition being breached, the innocent party will be forced to claim damages and repudiate the contract. This was established in the case Poussard v Spiers (1876) 1 QBD 410. Warranties are minor contractual terms that are not vital to the existence of a contract. They basically do not go to the root of the contract (Jones, 2013, 112). In the event of a warranty being breached, the innocent party will only claim damages but cannot repudiate the contract. This was held in Bettini v Gyie 1876 QBD 183.

The elements of an effective contract management practice include change management process, dispute resolution and contract administration and oversight. Contract management is also known as contract administration. They entail the processes and procedures that organizations can implement for the management of negotiation, performance, execution, termination and modification of contracts with parties such as vendors, customers and employees (McKendrick, 2012, 113). The elements that are contained in a contract management practice are applicable to both the business partners and the agencies as well. The contract management practices that were adhered to so as to ensure the implementation of the contract includes thorough investigation of Armstrong Ltd by Vikings as well as the legal background of the contract. There was a good comprehension of the nature of the business relationship to be established as stipulated by the inherent nature of the contract. Background information was obtained and a preliminary agreement reached upon on the essential and vital terms of the contract. A plan ought to be established for the ongoing performance review of parties under the contractual terms. As part of the plan, dates identified within the contract were noted such as options elections and performance milestones.

Statutory provisions of Buyers and Sellers Remedies

Section 52 of the sale of Goods Act entitles the seller to damages that are caused by any goods bought from the seller. However, the remoteness of damage should be ascertained before any damages are any awarded. It is the buyer’s prerogative to ensure that he does anything within their means to negate the losses that result from the damages that result from the usage of a product from the seller. The damages will cater for all the expenses that the buyer has incurred in repairing any mess. This is commonly referred to as “consequential loss.” According to the Sale of Goods Act 1979 UK, a contract arises between the buyer and the moment the seller sells some goods to the buyer (McKendrick, 2012, 113).

Common law remedies include damages and restitution while the equitable damages include cancellation and specific performance. General damages tend to make up for any losses that have been directly inflicted by the breach of contract. Exemplary damages are granted to punish a wrongdoer who acted fraudulently. While awarding damages, a vital limitation is the duty to mitigate. The non-breaching party is required to mitigate the damages to the most reasonable extent. Damages will not be recovered from reasons that should have been significantly ameliorated after the occurrence of the breach. A buyer whose duty has been breached can also claim nominal damages because he did not suffer any material loss from the breach of contract.

Implied Terms

Under statutory law, the Unfair Contract Terms Act 1977 covers contract terms that purport to restrict liability in contracts. Section 3(UCTA) of this act clearly outlines that where either a notice or contract term purports to exclude liability for negligence, then a person’s agreement of it will not be used as an indication of risks or voluntary acceptance. In Section 3a (UCTA), any obligation that may arise from the express or implied terms of the contract to exercise caution and reasonable care should be conformed to. Moreover, making a liability (or its enforcement) subject to a restriction is an onerous condition. The act applies to exclusivity clauses or contracts that define the responsibilities and obligations of the parties.

The consumer may also retain the goods and claim the price reduction or decide to repudiate the contract altogether after returning the goods and claim for a partial or full refund. This is an implied term as per Section 15(A) of Sale of Goods Act of 1979. According to Section 13 and 14, the seller has to ensure that the goods sold are fit for their designated purpose. This was also held in BSS Group Plc v Makers (UK) Ltd (t/a Allied Services) [2011] (McKendrick, 2012, 117). In the Trade Descriptions Act 1968, it is an offense for the buyer to sell goods that do not fit his description. In the case of faulty goods that do not meet the standards stipulated by the seller, the consumer will have a right to the full or partial refund, free replacement or repair if practicable and compensation for the loss.

If the seller refuses to honor the requests of the buyer, it will be his prerogative to show that the goods were not faulty when they were being bought by the consumer. As for the case of services, they should be delivered diligently and within a reasonable time. This has been stipulated in Section 3 of Trade Description Act of 1968. The provisions of the Trade Descriptions Act 1979 allow him to receive compensation for the loss or receive full or partial payment since the goods did not meet the description of the trader. A similar ruling was held in Tesco Supermarkets Ltd v Nattrass [1971]. On the statutory provisions on the remedies of the buyer and the seller, Section 16(b) of the Sale of goods Act necessitates that goods bought by the buyer should be of merchantable quality (Hare, 2003, 112). This is an implied condition.

Businesses and Intellectual Property

Intellectual property rights are legal rights created by the legislation of a country. The rights grant the owner of the creative property the exclusive rights to use and distribute their creative works. Owner of creative works will also earn some financial compensation as a result of their intellectual effort. Intellectual properties may encompass a variety of intellectual, creative or artistic works. However, a copyright does not cover information or an idea per se, but the manner in which some particular idea has been expressed. For the case of businesses, the laws pertaining to intellectual properties tend to cover all the business dealings pertaining to a particular trade name that is used by an organization (McKendrick, 2012, 63).

Statutory Provisions on Transfer of Property and Possessions

According to trusts law, a trust relationship is established the moment when a property becomes held by another person for the benefits of another person. The person who creates the trust relationship is called the Settlor while the person who receives the property that is being transferred from the settlor is called the trustee. The person to benefit from the property that is being held by the trustee is called the beneficiary. Eventually, the trustee will be granted a legal title which may, later on, be subject to compensation or reimbursement. All the proceedings that have been obtained from the trust may also be turned. In trusts law, the trustee may be a company, an individual or even a public body. The law of trusts and equity is rich with case laws that show how trusts have been preserved as a substantive difference to show that a trust only becomes lost when terms of the trust have been breached.

Statutory Provisions and Business Activities towards Consumers

Statutory provisions and business activities towards consumers have been enshrined within the commerce clause. The commerce clause has been mostly used in the justification of the exercise of any powers that have been vested in the legislature in relation to business activities. The clause is thus a Constitutional interpretation that grants the federal government power to regulate businesses. However, the power of the regulation of business activities has been perceived as consisting of three main categories of the regulatory authority (Hare, 2003, 112). This has encompassed power for regulating interstate commerce and any related instrumentalities, the power that grants the regulation of interstate commerce and the power to regulate all the economic activities taking place and whose orchestration has a significant effect on the economic activities of a state.

However, the power of the federal government is too cumbersome because the mere act of not buying something cannot be categorized as being a commercial or an economic activity. This thus implies that it cannot be subject to congressional regulation and the federal government will have a hard time in trying to put such factors into consideration as dictated by the commerce clause.

Conclusion

The paper has attempted to substantiate on some of the paramount proponents that pertain to the nature of a contract between a business and a consumer as well as the laws governing the two parties. To sum it all up, in a contract, offer and acceptance are a prerequisite in the formation of any contract. However, the parties therein should also have an intention of establishing legal relations in the course of their contract. Other elements in a contract are the innominate terms such as the conditions and warranties. A breach of a warranty cannot force either party to repudiate the contract. Parties to a contract should always ensure that the subject matter of the contract is not ambiguous and incorporate in the contract some mechanism for dispute resolution. Intellectual property rights are legal rights created by the legislation of a country.

The rights grant the owner of the creative property the exclusive rights to use and distribute their creative works. As for statutory provisions, the provisions and business activities towards consumers have been enshrined within the commerce clause. The commerce clause has been mostly used in the justification of the exercise of any powers that have been vested in the legislature in relation to business activities.

Summary

The prominent elements that constitute an enforceable contract are the offer, acceptance, intention to create legal relations, certainty and considerations. Any offer that lacks these elements is deemed as null and void. An offer ensures the contract is legally enforceable. A contract will be formed only whenever an offer has been accepted. An offer should be clearly stated so that the other party would know what exactly is entailed in the offer and the requirements of the offeror. In commercial transactions that involve businesses and the consumers, the offer ought to be legally binding. This is the essence of creating legal relations. However, the presumption will not hold if the parties emphasize from the onset that their contract does not have any intentions of being legally binding.

This will be connoted by the words “subject to contract”. In the event of the breach of the contract taking place, the common law will offer corresponding remedies that will seek to compensate the buyer. The remedies see to it that the buyer has been restored to his prior financial position before the contract took place according to Sale of Goods Act of 1979. A buyer automatically gets in enters in a contract with the seller if they buy goods from the seller. The consumer has the right of returning an item to the buyer if it proves to be of unsatisfactory quality. Statutory provisions and business activities towards consumers have been enshrined within the commerce clause. The commerce clause has been mostly used in the justification of the exercise of any powers that have been vested in the legislature in relation to business activities. There are also other terms that are present in contractual relations between businesses and consumers and include conditions, warranties and innominate terms.