Business Law: Advertisement, Misrepresentation, Exclusion Clause, Tort of Negligence

This document discusses various legal issues in business law including advertisement as an invitation to treat, fraudulent misrepresentation, enforceability of exclusion clauses, and tort of negligence. It provides relevant case laws and their application to the given scenarios.

BUSINESS LAW
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ASSESSMENT NO.
Question 1
Issue
The key issue is to determine whether the advertisement regarding the sale of cutlery is
considered to be an offer or an invitation to treat.
Law
An offer in the contract is an invitation extended by offeror to the offeree in order to enact
contract by providing acceptance. The acceptance needs to be sent by offeree for binding
contractual liabilities on the parties. On the other hand, invitation to treat is an invitation for
other party’s offer for commencing negotiation with interested buyers (Andrews, 2015).
Advertisement in newspaper regarding the sale of a service/goods is not considered an offer,
but merely termed as an invitation to treat. It is evident from the verdict given in Partridge v
Crittenden [1968] 1 WLR 1204 case where the advertisement of the defendant in the
magazine regarding the sale of the protected birds was considered as invitation to treat and
not an offer (Byrne, 2013). When there is invitation to treat, then the party who made
advertisement has the legal rights to either accept or reject the offer of the other party.
Further, the other party who makes offer against the invitation to treat cannot force the party
to enact the contract because their acceptance regarding the advertisement was mere
invitation to treat (Peel, 2016). Further, there are some cases where the advertisement it self
contains the terms and price and intention of the party to form contract which implies that
advertisement is offer not an invitation to treat as evident from Carlill v Carbolic Smoke Ball
Company [1893] 1QB 256 where the defendant has directed offer through advertisement
under unilateral contracts (Taylor & Taylor, 2015).
Application
It is apparent from the case facts that Trotter’s Traders has placed an advertisement in Borneo
Bulletin regarding the sale of silver cutlery set. The advertisement did not contain any
information regarding the sale price or other information about cutlery. It implies that
Derek’s advertisement is not an offer in relation to unilateral contract rather it is an invitation
to treat. This is because company has invited the offers from interested party for negotiation.
Hence, Richard should make an offer against the advertisement because it is an invitation to
treat.
Conclusion
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ASSESSMENT NO.
It can be concluded based on the above that advertisement of Trotter’s Traders about the sale
of silver cutlery is mere invitation to treat not an offer because it does not contain any details
regarding the cutlery.
Question 2
Issue
The issue is to offer a legal advice to Richard upon whether he has the legal rights to sue
Derek for the misrepresentation made in relation to sell the silver cutlery set which is actually
lead based counterfeit.
Law
Representations are factual statements which are made in the negotiation period prior to
contract enactment between the contracting parties. As the name suggests when the party
misrepresents the factual statements to the other party in order to lure the other party into
contract formation, then it would be categorised as misrepresentation. There are three types
of misrepresentations based on the intent of the underlying seller i.e. negligent
misrepresentation innocent misrepresentation and fraudulent misrepresentation. In relation to
the present case, fraudulent misrepresentation is of interest. This type of misrepresentation is
established when the seller makes false statements which he knows are not true (McIntyre,
2013).
In this scenario, the purpose of the party to make fraudulent misrepresentation is just to affect
the other party to enact the contract. The relevant case is Derry v Peek (1889) 14 App Cas
337 case. This case highlighted three following conditions for fraudulent misrepresentation
(Andrews, 2015).
1) The statement should be factual in nature and not mere opinions.
2) The seller making the representation must be aware that the underlying representation
is false but makes the same to lure buyer into contractual relation.
3) The buyer must rely on this misrepresentation for formation of contract.
When it has been proven by the other party that the representor party has made fraudulent
misrepresentation so as to bring the party into contractual relationship, then he has the legal
rights to unwind the contract or/and claim for the damages. As per the verdict of Doyle v
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Olby Ltd [1969] 2 QB 158 case, the party who suffered the losses due to the fraudulent
misrepresentation can claim compensation against damages incurred irrespective of the fact
that the loss was foreseeable or not. The plaintiff party can also demand rescission of contract
in fraudulent misrepresentation as evident from the verdict of Car and Universal Finance Co
Ltd v Caldwell [1965] 1QB 525 case (Wardman, Abbot & Pendelbury, 2013).
Application
Richard was looking for a new silver cutlery set. It is evident from the case facts that safety
and quality of the set are two very essential aspect for Richard to enact a contract with Derek
regarding the purchase of the set. He has enquired from Derek about the suitability of usage
of cutlery set in marine condition and if it is prone to the corrosion or not. However, Derek
has made fraudulent misrepresentation by stating that the respective set has already been used
by Royal Yacht ‘Britania’ recklessly without bothering regarding the actual truth behind the
set. By relying on this representation, Richard has enacted a contract with Derek for a
consideration of B$8,000 for the sets. However, in reality the set had been stolen from the
disposal site of South Korea which was clearly declared as unsafe or usage and sale due to
lead counterfeit and cheap quality by the South Korean authorities. It is noteworthy that if
Richard has the knowledge regarding the actual quality of the set then he would not have
enacted the contract with Derek. Hence, Richard has the legal position to sue Derek for
fraudulent misrepresentation and claim for the damages suffered.
Conclusion
Yes! Richard has the legal right to sue Derek and claim for the damages as he has made
fraudulent misrepresentation in relation to the cutely set used by Royal Yacht whereas it is
from disposal site of South Korea.
Question 3
Issue
The key legal issue is to ascertain the validity of the exclusion clause printed at the back of
the receipt given to Richard by Derek on the purchase of the curtlery.
Law
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ASSESSMENT NO.
Exclusion clause may be defined as any contractual term which is inserted with the objective
of limiting liability of the inserting party when certain events take place. With regards to
enforceability of these clauses, a key requirement in case of unsigned contracts is that
reasonable notice should be provided about the presence of this clause by the inserting party
(Taylor & Taylor, 2015). A leading case in this regards is Chapelton v Barry Urban District
Council [1940] 1 KB 532. In this case the plaintiff hired chairs and was given a receipt for
the same. This receipt at the back side contained an exclusion clause which protected the
defendant from any liability arising in case of any harm caused from the hired chairs. The
plaintiff sat in the chair and suffered injury owing to fall on account of the chair being faulty.
When the plaintiff demanded damages from the defendant, the exclusion clause was referred
to. However, the court decided the matter in the favour of the plaintiff. This was because
there was no message written on the receipt which would indicate the presence of contractual
term on the back side of the receipt. Owing to failure to provide reasonable notice, the
exclusion clause was held was not enforceable (Byrne, 2013). A similar verdict was reached
in another case involving the same issue which is Parker v South Eastern Railway (1877) 2
CPD 416 (Peel, 2016).
Application
In the given case, Richard has purchased curtlery from Derek for a consideration of B$ 8,000.
After the payment of the mutually agreed amount, he has received the receipt for the
payment. However, on the back side of this receipt the exclusion clause is present which
seeks to limit any liability arising on account of any harm or damage caused on account of
the usage of the sold products. Clearly, this has not been read by Richard. Also, it would be
reasonable for any person in Richard’s position to assume that the receipt did not contain any
contractual terms at the back. Further, in the receipt there was no indication to inform the
buyer about the presence of the exclusion clause. Besides, the staff also did not hint towards
the presence of the exclusion clause. Clearly, there is failure to provide reasonable notice to
Richard about the exclusion clause. As a result, the exclusion clause printed at the back of
thee receipt would not be held as enforceable.
Conclusion
Owing to failure on the end of the seller (Derek) to provide reasonable notice about the
presence of exclusion clause at the back of the receipt, the exclusion clause would not be
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ASSESSMENT NO.
enforceable. Hence, Richard can sue the seller for the damages incurred due to the use of the
contaminated curtlery.
Question 4
Issue
The main issue is to determine whether guests of the gala nights can claim the damages in
relation to tort of negligence against Richard based on the case facts.
Law
The tort of negligence would be established where the three key required conditions are
satisfied i.e. presence of duty of care, breach of duty and damages. The defendant must have
duty of care towards the plaintiff which would be determined based on neighbour test. As per
this test, neighbour is the entity who may be reasonably harmed due to the action or inaction
of the defendant (Action doer). Further, it is responsibility of the action doer to take special
measure in order to fulfil duty of care for any foreseeable damages as evident from the
judgement of Donoghue v. Stevenson [1932] AC 562 at 580 case (McIntyre, 2013).
Also, when the action doer does not pay attention or necessary measures to fulfil duty to care
and discharge the duty of care towards the plaintiff, then it would be termed as breach of duty
of care. It is noteworthy that the defendant is expected to take all actions that a reasonable
person in the situation would take to ensure that the plaintiff does not suffer any foreseeable
damage (Ricahrds, 2013). Further when the plaintiff suffers damages due to the breach of the
duty of care, then the defendant party would be held responsible for the damages. In order to
establish nexus between the breach of duty and damages suffered by plaintiff, it needs to be
proved that damage would have not occurred if the breach of duty to care had not happened
(Wardman, Abbot & Pendelbury, 2013).
Application
It is evident that Richard has duty of care towards the guests whom he has invited for the gala
evening. He has ensured about the freshness of meat and vegetable but he has not bothered to
check the quality of the cutlery used for serving the food. Any reasonable person in his
position would have taken the fresh cutlery or done a quality check so as to ensure that it does
not contain any hazardous contaminant like lead. Also, it was quite possible that poor quality
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ASSESSMENT NO.
of the cutlery may harm the guests and can cause poisoning. However, he has not paid
reasonable attention in this aspect which shows that he has breached the duty of care towards
the guests. Also, the guests were having food by relying on Richard and therefore, the
damages incurred to the guests in terms of severe poisoning would be foreseeable damages
that could have been prevented if Richard has done a quality check on cutlery set. Hence, the
guests have the legal rights to sue defendant Richard who acted negligently.
Conclusion
Tort of negligence would be applicable here and the guests of the gala event have suffered
due to the negligence of the Richard as he has not checked the quality of the silver cutlery
sets before using them for the event. Hence, guests have the legal right to sue Richard and
claim for the damages.
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ASSESSMENT NO.
References
Andrews, N. (2015). Contract Law (3rded.). Cambridge: Cambridge University Press.
Byrne, S. (2013). Applied Business Law (2nd ed.). London: ICSA.
McIntyre, E. (2013). Business Law. (4thed.) Harlow, England: Pearson Longman.
Peel, E. (2016). The Law of Contract (7thed.). London: Thompson.
Richards, P. (2013). Law of Contract (3rd ed.) Harlow: Longman
Taylor, R. & Taylor, D. (2015).Contract Law (5thed.). London: Oxford University Press.
Wardman, K., Abbot, K., & Pendelbury, N. (2013) Business Law (9th ed.). London: Cengage
Learning.
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