Business Law: Eatwell vs. Chickfresh Contract Dispute

The case study highlights the importance of quality standards and implied duties in contracts. Chickfresh supplied poor-quality chicken to Eatwell, breaching their contract obligation. The exclusion clause in the contract, which stated that Chickfresh accepted no liability for any products supplied, was deemed illegal as it breached the quality standard mentioned by Eatwell. Additionally, the implied duty of supplying good-quality products imposed on Chickfresh. The case law supports this finding, citing the example of Saw Pipes vs. A Ltd., where the court held that there is an implied duty to maintain a certain level of quality in any product or service. As a result, Chickfresh is liable for the damages caused by their poor-quality chicken, and Eatwell has suffered a decline in sales due to the products' weakness compared to competitors.

Business Law Assignment
Question 1
Advise to Eatwell on whether Chickfresh’s or its own contract prevails
Eatwell contacted Chickfresh in July 2015 and requested a quotation from them for the supply of
chicken. The quotation sent by Chickfresh was duly accepted by the Eatwell. So, they sent their
standard form contract to Chickfresh for obtaining their acceptance. (It is assumed that the
contract contained all the relevant clauses and the clauses were in an understandable language).
Chickfresh accepted the offer, but the company secretary of Chickfresh inserted an exclusion
clause to the contract. The company Eatwell was not aware of this clause, and they sent a copy of
their standard terms back to Chickfresh.
As per the contract law, ‘acceptance of offer’ means that the party to whom the offer is made has
expressed his assent to the terms of the offer. The acceptance is said to be valid when it is made
in the manner requested by the offeror, there is an intention of acceptance by the offeree, it is
unequivocal and unconditional, and it is manifested as per the terms of the offer (Elliott &
Quinn, 2007). The contract is already formed by a party, and it is sent to the other party for
acceptance. So, any addition, deletion, correction or change in the provision of contract can be
done only by amendment. The amendment can happen only when both the parties initial it. It
cannot be one-sided and cannot happen without the consent or approval of the offeror. Even if
there is a typo in the contract and the offeree identifies it, he is not authorized to change it on his
own; he needs to inform it to the offeror, and the error is removed with the initials of both parties
(Elliott & Quinn, 2007).
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In the present case, the acceptance by Chickfresh was not unconditional and unequivocal. By
adding the clause that "Chickfresh accepts no liability for any of the products supplied" is a
condition on the existing terms of the contract that were sent by Eatwell. It is assumed that
Eatwell had put a clause in the contract that Chickfresh will be liable for any of the products
supplied. But, Chickfresh refused to accept this clause in the contract which made the acceptance
conditional and equivocal. Thus, the acceptance by Chickfresh stands invalid. Also, the
exclusion clause that has been added by Chickfresh is considered as a revocation of conditional
acceptance. This means that the offeree accepts the offer made by the offeror but with his own
conditions put in it (Adams, 2014). The revocation of conditional acceptance is effective upon
receipt.
In Life Insurance Co v Phillips, the company made an offer to Phillips for buying the insurance
cover in case of theft, accident, and fire of its supplies in transit. The offer that was made by the
company was valid and contained all the relevant clauses. The offer also mentioned that the
acceptance has to be made via letter and the company Phillips will have to send the premium
amount to the company. Phillips accepted the offer and sent the letter of acceptance along with
the money. But when the acceptance was read, it was found that Phillips added the clause that
the company will protect its goods in transit from theft, accident, fire or "any other physical
damage." The company rejected this acceptance and returned the money. Phillips sued them for
breach of contract. It was held that since the acceptance was “conditional and equivocal” so it
stands invalid and when the acceptance is invalid, no contract has been formed between the two
parties. So, the insurance company is not liable for paying any damages to Phillips (McKendrick,
2014).
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From the above discussion and the analysis of the case law, it can be concluded that the contract
of Eatwell prevails and not of Chickfresh because the acceptance of Chickfresh was conditional
and equivocal which makes the acceptance invalid. If they wanted to add any clause, they would
have taken the approval of Eatwell, and both the parties must have signed it. Also, they did not
inform Eatwell about the amendment that they made to their offer which is again illegal and
invalid. So, the contract of Eatwell prevails, and the contract made by Chickfresh is not valid.
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Question 2
Advice to Eatwell on the legality of exclusion clause and its impact on the facts supplied by
Eatwell and Chickfresh
Eatwell sent an offer to Chickfresh that contained all the clauses related to the quality of the
products, quantity, and demand, etc. (this is an assumption). Then when the offer was accepted,
Eatwell sent back a copy of their standard terms back to Chickfresh. It is assumed that they
would have mentioned the quality standards in their standard terms. But, Chickfresh included an
exclusion clause in the contract that was "Chickfresh accepts no liability for any of the products
supplied."
So, the exclusion clause is illegal for two reasons: one is that it breached the clause that was
mentioned by Eatwell in their contract. The acceptance was not unconditional and unequivocal.
So, the exclusion clause becomes illegal. Secondly, the obligation of Chickfresh in this
contract was to supply fresh chicken to Eatwell, and the clause was a breach to this obligation in
an indirect manner. When the parties have contracted that Chickfresh will supply fresh chicken
to Eatwell and in return get payment for its supply, then it cannot give up its liability of the
products that it supplies. The supplies of chicken that were provided to Eatwell were found to be
of poor quality which is unacceptable in the contract. In case, the ‘quality’ was not defined by
Eatwell in its contract or the standard terms of its offer, then also, it is an implied duty that the
supplier has to supply the products of good and acceptable quality. An implied duty imposes
obligations and provides for certain rights which are not expressly set out in a contract (Ashton,
2014).
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In Saw Pipes vs. A Ltd., the company, gave the contract of supplying 400 pipes every month to
Saw Pipes. The pipes were delivered on time and the demanded quantity. But, the customers to
whom the pipes were sold complained about its poor quality and less durability. When the
investigation was done, it was found that the pipes were of poor quality and were a threat to the
life of people as they could break anytime. When Saw Pipes were asked to stop their supply and
pay for the damages, they refused by saying that the contract did not contain any clause about the
quality of the pipes. It was held that this was an implied duty that aroused out their contract with
the company as the quality is must maintain in any kind of product or service and the product's
poor quality should not lead to harm to the people (McKendrick, 2014).
Due to the poor quality of the Chicken supplied by Chickfresh, Eatwell says that it suffered sharp
decline in its sales as the products got weak in comparison to the competitor’s products in the
marketplace. Due to this decline, the company has to lay off its employees, and they have to look
for financing the losses that it has suffered. All this has happened because Chickfresh included
one illegal clause in its contract with the company Eatwell and in line with that clause; it
supplied poor quality chicken that could also cause problems to the health of people. Though
Chickfresh denied this allegation and refused to supply the products further but the declining
sales of the company are proof that the customers did not like the quality of the products and
hence they stopped purchasing.
So, as per the terms of the contract, the implied duty, and the case law, it is clear that the
exclusion clause was completely illegal. The company Chickfresh is liable to pay the damages if
Eatwell asks for it.
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Question 3
Contrast of the registered companies with the general partnership
Registered companies are those companies that are registered under the ‘Companies Act, 2006’
of UK (Haltiwanger, 2016). General partnership is an association of two or more people who
creates an unincorporated company by agreement, by giving a proof of their existence or by
estoppel and are personally liable for the legal actions and the debts that they may face
(Haltiwanger, 2016).
Advantages with registered companies over the general partnership
 When the registered company faces any debts or legal formalities, the members of the
company are not held liable for that personally, but in general partnership, the partners
are held personally responsible for the debts and the legal responsibilities (Poza, 2013).
Thus, the shareholders of the registered companies are protected from the risk of losing
their personal assets, but the partners can lose their personal assets.
 When there is the death of any member or withdrawal of any member of the company,
the existence of the company is not harmed, and the company is not dissolved. But, in
general partnership, the death or withdrawal of the partner causes the partnership to break
(Poza, 2013).
 When the registered company has to transfer the ownership, it can simply do it by selling
the shares to a buyer who is willing to buy it. But, this cannot be done in a general
partnership as it is a varying time-consuming process and requires legal representation,
contracts, valuation procedures, etc.
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 The flexibility to take on the debts is more with the registered companies as compared to
general partnership because the nature of existence of these companies is permanent
(Craig, 2012), so it is easy to acquire the lenders , and the investors do not have to worry
about the death of the company or the members of the company.
Disadvantages of registered companies over the general partnership
 There are no business taxes that are to be paid in the general partnership. But, registered
companies are required to pay the state and the national taxes.
 Registered companies are less profitable than the general partnership. This is because;
they have to pay the taxes twice. One is when the tax is levied on the corporation as the
person, and secondly on the income which is gained through the ownership of the
company and the personal income is earned. Thus, due to the taxation happening twice,
the income gets diluted, and the profitability of the company reduces (Craig, 2012).
There are very few disadvantages of registered companies over the general partnership. In the
present case, Eatwell, as well as Chickfresh, are both registered companies so; the people who
work here will not get affected by the legal obligations that the companies are facing. Even if the
companies break the contract and Eatwell have to suffer from losses due to delay in supplies and
non-fulfillment of the demand of the people, the shareholders of the company will not have to
bear the loss from their personal assets and the existence of the companies will not be at stake.
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References:
Adams, A., 2014. Law for Business Students 8th edn. Pearson Higher Ed.
Ashton, J., 2014. Is there a duty of good faith in English contract law?.Student Law Review, 71,
pp.14-15.
Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.
Elliott, C. and Quinn, F., 2007. Contract law. Pearson Education.
Haltiwanger, J., Hurst, E., Miranda, J. and Schoar, A., 2016. Introduction to" Measuring
Entrepreneurial Businesses: Current Knowledge and Challenges". In Measuring Entrepreneurial
Businesses: Current Knowledge and Challenges. University of Chicago Press.
Keenan, D.J. and Smith, K., 2006. Smith & Keenan's law for business. Pearson Education.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
McLeod, I., 2010. Legal theory. Palgrave Macmillan.
Poza, E.J., 2013. Family business. Cengage Learning.
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