LST2BSL Introduction to Business Law and Ethics

Q1. The contract between Parker and Cruelty-Free Cobbler Supplies (CFCS)

Issue:

In several cases, parties that intend to create legal relations undergo a phase wherein they exchange information with respect to their side of the bargain, their responsibilities and understand whether the intended contract would be fruitful for them. This phase is called the negotiation phase. Things that are said during the negotiation phase can either be a term of the contract or not a term but representations to induce the other party to enter into a contract, mere puffery or personal opinions. This needs to be checked in the instant case whether an all-natural vegan leather was a term of the contract between Parker and CFCS.

Relevant Law:

If the statement is made by a person who possessed certain specialized skill or expertise such that the other person had no option but to rely on that statement, then such statement can be considered a term or a promise within the contract.[1]

Further, in deciding questions about whether a representation made by the seller constitutes a term of a contract for the sale of goods, the courts shall conclude in a way in order to give proper commercial effect to the transaction for it to meet its intended wholesome purpose.[2]

Application:

It appears from the negotiations between Parker and Margaret (owner of CFCS) that Parker has relied on the good intention and judgment of the seller Margaret to make his purchase decision and placed an order for 20 square metres black vegan leather relying on the representations made by Margaret. It is evident from their initial negotiations that Parker has made it quite clear the purpose he wants to make the purchase is for his environmentally conscious customers who are interested only in purchasing eco-friendly green products made from ‘natural’ alternatives to the animal hide. This was followed by a specific inquiry made by Parker with respect to the vegan leather being ‘all-natural or not which was confirmed in affirmation by Margaret. Therefore, no puffery or opinions are involved,[3] in fact these are statements of facts relied on by the buyer to make his purchase decision.

Conclusion:

In view of the above, the requirement for vegan leather to be all-natural could be considered a term within the contract to give proper commercial effect to the contract.

Q2. The contract between Sonia and Parker

Issue:

In determining whether a particular statement could be considered a term within a contract it often becomes difficult if the representations are made at the time of negotiations between the parties. Similarly, in this case, although Sonia has demanded vegan leather, a question that remains to be answered is whether the presence of any other artificial / faux / synthetic materials could be considered a term that is part and parcel of the contract between her and Parker.

Relevant Law:

If there are one or more representations that could be interpreted in more than one particular way, an objective bystander test would be used to determine the true intention of the parties negotiating the deal and concluding a contract.

The courts shall also consider all circumstances of case to give true commercial effect to the transaction in deciding whether a particular representation is a term within a contract.

Application:

It so appears that Sonia failed to inform the seller Parker that she wanted her product to be free from any synthetic or faux substances. She also never mentioned about her allergy from synthetic coloring. Had that been the case, Parker could be reasonably expected to inform her about the possibility of presence of allergic substances on the shoe skin. Besides, in the manufacturing of vegan leather, artificial and synthetic substances are often used such as polyurethane to make it look like the genuine leather like look and feel. Therefore, it would not be just and equitable to be purchasing something expecting the other person to know your inner thoughts.

Therefore, a reasonable bystander looking at the negotiations between Sonia and Parker is likely to conclude that vegan leather made shoes were requested and they were supplied by Parker, successfully concluding the transaction. Any further thoughts or intentions cannot be said to intrude the contract.

Conclusion:

Since Parker was not aware of Sonia’s allergy, nor her thoughts to buy shoes free from artificial coloring substances, Parker cannot be said to have the intention to be bound by something which he is unaware of. Consequently, all-natural material ingredients cannot be said to be a term within the contract between Parker and Sonia.

Q3. Color of soles on the pair of George’s sneakers

Issue:

George has ordered shoes for his lawn bowling league competitions which require all participants to wear all-white shoes on the lawn. However, upon receiving his order he finds out that the shoes received have brown-colored soles. The question to be answered in the instant case is whether the color of shoes being white is a condition or a warranty in this contract.

Relevant Law:

In order to determine whether the term is a condition or warranty we have to look at the effect of breach of this term on the contract as a whole.[4]

A term is a condition if it is essential to the conclusion of contract and its non-performance strikes at the very core of the contract.[5]

In case of breach of a warranty, the aggrieved party is not entitled to avoid the contract, but it entitles only to damages.[6]

Application:

At the time of placing an order for his new shoes, George made it very clear that they have to be white colored rubber soles. This was necessary for George as he had to be present at the lawn bowling league competitions which only allowed players to have all white shoes including their soles. If this was not the case, George could be prevented from his sports performance.

Therefore, breach of this term expressly stated in his order form would strike at the very purpose of making purchasing form Parker’s store, so much that it defeats the entire purpose of buying new shoes for George.

Conclusion:

In view of the above, the term was a condition to the contract and its fulfillment is necessary else George can avoid the contract in its entirety and also be entitled to damages.

Q4. Parker’s responsibility for the wrong color of soles

Issue:

Parker has displayed an exclusion clause on the wall right beside the cash counter on his shop wherein it is stated that the shop does not accept any responsibility for the breach of any warranty. The legality of this exclusion clause limiting his liability and whether he is still liable for the breach of contract is the issue that needs to be clarified.

Relevant Law:

Buyer’s rights to certain conditions and warranties that are implied by the statute cannot be restricted even if the seller expressly so states.[7]

The common intention of the parties is a condition precedent to the formation of the contract without which the contract cannot be made. Accordingly, both buyer and seller should have the willingness to be bound by each and every term within the contract.[8]

Application:

The purpose of the display of this sign appears to be limiting the liability of Parker even in cases where he has breached the express / implied terms of the contract. This sign is therefore contra proferentum i.e. it intends to limit the scope of the liability of the person against the interest and to the prejudice of the person who is relying on it. Further in case of sale of goods, there is an implied condition that if the goods are sold by description, they by all means should correspond to that description. Any defensive clause cannot be relied on by the seller to act against the interest of the buyers or to prevent his liability in cases where he has fall short of the performance that was agreed with the buyers.

Further, relying on the principles in the Council of the City of Sydney v West[9] any term has to be within the four corners of the contract and obligations under the contract cannot be contracted out by means of defensive clauses. Therefore, George cannot be expected to excuse liability for losses suffered by himself for any acts of Parker not authorized under the contract. Parker should still be held responsible for any breach of term (warranty or condition).

Conclusion:

Therefore, providing relief to Parker int eh light of the defensive clause shown at his shop would eb against the interest of natural justice and fair play. Parker will still be responsible for the wrong color of shoes delivered to George.

References

Poussard v Spiers and Pond 1 QBD 410 (1876)

Associated Newspapers Ltd v Bancks (1951) 83 CLR 322.

Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502.

Bettini v Gye (1875) LR 1 QBD.

Council of the City of Sydney v West (1965) 114 CLR 481.

Dowling v. NADW Mktg., Inc. (1982) 631 S.W.2d 726, 729.

Lambris, Michael A., and Griffin, Laura. First Principles of Business Law: Textbook and E-study Modules. 10th edition. South Melbourne, Victoria: Oxford University Press, 2017.

Oscar Chess v Williams (1957) 1 WLR 370.

Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) 1 QB 401.

[1] Oscar Chess v Williams (1957) 1 WLR 370.

[2] Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502.

[3] Dowling v. NADW Mktg., Inc. (1982) 631 S.W.2d 726, 729.

[4] Poussard v Spiers and Pond 1 QBD 410 (1876)

[5] Associated Newspapers Ltd v Bancks (1951) 83 CLR 322.

[6] Bettini v Gye (1875) LR 1 QBD.

[7] Lambris, Michael A., and Griffin, Laura. First Principles of Business Law: Textbook and E-study Modules. 10th edition. South Melbourne, Victoria: Oxford University Press, 2017.

[8] Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) 1 QB 401.

[9] (1965) 114 CLR 481.

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