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PART A

Introduction

A contract is a written agreement that is binding between two contracting parties regarding the contents of the contract. A valid contract has the following elements, an offer, acceptance, consideration, and intention to create legal relations between the two parties.

QUESTION 1

The seller’s invitation to treat is made to the buyer, inviting them to make an offer. An invitation to treat represents a willingness to negotiate the terms of an offer for the two parties to contract successfully. The court held in (Pharmaceutical Society of Great Britain V Boots, 1953) that is an invitation to treat, the buyer makes an offer to purchase the goods. Unlike an offer, acceptance is an invitation to treat does not lead to a valid contract.

An offer is a statement made by an offeror to an offeree that demonstrates the willingness to be bound by resulting legal obligations concerning the contract. The court held in (Harvey v Facey, 1983)that the offer must demonstrate the intention to create and be bound by arising legal obligations in the contract.

QUESTION 2

Incorporation of terms in a contract means introducing new terms to the already existing terms in a contract. For an incorporation to be valid, it must satisfy the following requirements. Firstly, the court established in (Olley v Marlborough Court Hotel, 1949) that the incorporation must be made before or during the formation of the contract. Secondly, the terms made must be incorporated into a document that was intended to be contractual. Thirdly, as illustrated by the court in (Parker v South Eastern Railway Company, 1877), the court held in (L’Estrange v F Graucob Ltd, 1934) the party introducing the new terms must take reasonable steps to bring to the attention of the other party the incorporation of the new terms.

QUESTION 3

The legal principle established by the court in Hadley v Baxendale is that a party in breach of contract is liable to pay the affected party all foreseeable losses suffered as a result of the breach of contract. However, according to the court, the party is under no obligation to pay for unforeseeable losses using the information available to him at the time of the breach. Breach of contract arises where a party to an agreement by omission or commission fails to honor his contractual obligations. The rationale behind general rule in Hadley v Baxendale is to compensate the victim party for the losses suffered or take him back to the position he was in before the breach occurred. This rule promotes responsibility and accountability between the contracting parties.

QUESTION 4

An exemption clause in a contract is a clause that stipulates that a part is either exempted, excluded, or limited to the liability in the contract. The two primary forms of exemption clauses are the limitation clause and the exemption clause. Exemption clauses may sometimes be used unfairly in arrangements where there exists inequality in bargaining powers between the parties. When determining the validity of exemption clauses, courts will mainly focus on the fairness within the contract between the two parties. The Unfair Contract Terms Act of 1997 is the statute that regulates exemption clauses in business and commercial activities.

QUESTION 5

Misrepresentation is an untrue statement of fact made by a party to another party that persuades the other into entering into a valid contract. The elements required for an actionable claim in misrepresentation are; first, the statement made by the party must be untrue, the statement maker was aware of the false nature of the statements made, and thirdly, the receiver relied on the inaccurate statements into entering the contract.

PART B

Introduction

The arrangement between the school and Big Build limited is a contractual agreement. A contract is a legally binding agreement made by two or more parties to perform agreed contractual obligations. A valid constitutes an offer made by an offeror to an offeree. Upon acceptance, the contract between the two parties becomes binding. Consideration must, in turn, be paid for the work done. Additionally, there must be an intention between the two parties to be bound by the resulting contractual obligations in a valid contract.

The issue demonstrated in the fact pattern relates to breach of contract and the consequences of breach of contract. Breach of contract arises where a party by omission or commission fails to perform or honor their resulting contractual obligations and duties.

One of the contract terms in the fact pattern is that the work must be completed before 1 September 2020, failure of which Big Build is required to pay a penalty of £ 10 000 per day until completion.  Notice of incorporation of terms in a contract must be made at the time of formation of the contract or before the conclusion of the contract. The party introducing the terms must bring to the attention of the other contracting party the introduction of the new terms. Thirdly the new terms must be made in a contractual document. The building company raises a defense that it did not read the contract in total, and the part of the penalty and amount of the fine payable was unclear to them at the time of the formation of the contract. It asserts, therefore, that had it known about the penalty, it would not have agreed to sign the contract.

As a general rule, reasonable steps must be taken to bring incorporated terms to the attention of the other contracting party in a valid contract. The court in (Parker v South Eastern Railway Company, 1877) held that it does not matter whether a party read the new incorporated terms in a contract what matters is whether the party who incorporated the terms took reasonable steps to bring to the attention of the other party the existence of the words. From the case in the fact pattern, the school as the incorporating party did not take reasonable steps as required by the law to bring the penalty clause to the attention of the building company. Therefore, the clause was invalid as the notice was not made to the building company before or at the time of entering into the contract.

The frustration of a contract refers to where unforeseen events hinder the further performance of contractual obligations. (Taylor v Caldwell, 1863) established the doctrine of frustration.  The principle of frustration offers a remedy in the following circumstances; where there is non-occurrence of an event, where the expenses have increased due to no performance, where there is the impossibility of performance by one party, in an outbreak of war, and cases of delay and interruption during the performance of the contractual obligations. The delays occasioned in the arrival of essential materials from Europe delayed the completion of the building within the intended time. As demonstrated by the court in Taylor v Caldwell, this delay was an unprecedented event that neither party had expected and, therefore should bear liability arising from the delay.

From the fact pattern, the building company is in breach of the contract ad it failed to complete the work on 1 September 2020. A breach occurs where on the one end, a party in breach fails to perform their contractual obligations. The elements of breach of contract are the existence of a valid agreement between the two or more contracting parties—the plaintiff’s performance of contractual obligations or non-performance caused by the defendant’s breach.  A loss suffered by the plaintiff as a result of the defendant’s breach. The court in (Western Distributing Company v Diodosio ,1992) held that a plaintiff suing for breach of a contract must prove the existence of the four elements of a breach to recover resulting liquidated damages.

A contract is enforceable where the parties to the agreement have mutually agreed to be bound by the warranty. In cases of breach of contract by either a party, a party is entitled to recover consequential damages for the foreseen losses suffered. A valid contract exists between the two parties in the given case between the school and the building company. The building company is in breach of the contract as it failed to complete the work within the agreed period. The breach occurred when the building manager left the building company with some employees in a competitor company. Additionally, delays in the delivery of building materials also caused the breach of contract.  As a result of the breach, the school suffered a loss for hiring temporary cabins for science lessons and the noise and other disruptions in the school during the construction.

Conclusion

 A liquidated damages clause in a contract such as the one provided in the fact pattern is unenforceable. It is proven to be extravagant, excessive, unreasonable, and oppressive to the other party. Liquidated damages in cases of breach of contract must be a genuine pre-estimate of the loss suffered. Therefore, the penalty clause in the agreement between the school and the buildingg company is unenforceable because it is excessive and oppressive.

REFERENCE LIST

List of cases

Harvey v Facey (1983) AC 552.

 L’Estrange v F Graucob Ltd (1934) 2 KB 394.

Parker v South Eastern Railway Company (1877) 2 CPD 416.

Pharmaceutical Society of Great Britain V Boots Cash Chemists (1953) EWCA Civ 6.

Taylor v Caldwell (1863) 3 B & S 826.

Western Distributing Company v Diodosio (1992) 841 P. 2d 1053).

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