Principles of Commercial Law - PDF
Added on 2021-06-15
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Running head: COMMERCIAL LAW0Principles of CommercialLaw
COMMERCIAL LAW1Question 1IssueThe key issue is whether the oral assurance which Kalpana gave to Rafia is considered as aterm of the contract or not?LawA contract creates a binding relationship between two or more parties, and they are requiredto comply with its terms. It is necessary that the contracting parties must comply with theterms of the contract or else they can be found guilty of breach of the contract, and theaggrieved party can claim for damages. A contract can be written or oral, and it creates acontractual relationship as long as the parties fulfil its essential elements. The first element isan offer which must be given by a party of the contract, offeror, to another party for creatinga legal relationship and the party, offeree, must accept such offer without any changes in itsterms (McKendrick, 2014). A valid offer requires that the offeror must be bound by its termswhich mean after its acceptance, the offeror cannot change the terms of the contract. In aleading case, the plaintiff sends a telegram to the defendant to know the lowest price ofBumper Hall Pen. The defendant replied that lowest price is £900. The plaintiff provided thathe agreed to purchase the pen for £900. The Privy Council provided a judgement that nocontract is created between the parties because the defendant just supplied the informationabout the pen to the plaintiff in their first interaction (Blount and Martin, 2017). The request for knowing the price of a product cannot be constituted as an offer, therefore,the telegram sent by the defendant cannot be considered as an acceptance and no contractualrelationship existed between the parties (Harvey v Facey). The second essential element is theacceptance of the offeree without any changes in terms of the contract. A party offered to sellhis land for £1000, however, the party reply by an offer of £950. The first party rejected thecounteroffer, after that the offeree decided to accept the original offer of the offeror. Thecourt held that a counteroffer resulted in cancelling the original offer and the offeree cannotaccept the original offer unless it is revived by the offeror (Hyde v Wrench). While enteringinto a contractual relationship, parties to a contract must have the intention to bindthemselves by the legal terms of the contract (Monaghan and Monaghan, 2013). Theintention of contracting parties is an essential element for forming a contract based on whichdomestic and social agreements are not considered as a commercial contract. In a leading
COMMERCIAL LAW2case, Esso made a promise for giving away a ‘world cup coin’ with the condition that the coinwill be given to customers who purchase 4 gallons of fuel. HMC&E argued that such coinsare taxable and Esso owed £200,000 in tax Esso provided that such coins are free gifts whichdid not have a legal effect. The House of Lords provided that an intention to create a legal relationship is present becausecoins were given with a commercial context (Esso Petroleum v Customs & Excise). However,coins are not exchanged for consideration hence they are not for resale. Consideration of acontract is another key element which mandatory to create a valid contractual relationship(Turner, 2014). A consideration is referred to the exchange of promises in which each partyreceives a benefit and suffers a detriment. It is necessary that the consideration must have avalue in the eyes of the law. In a leading case, a husband transfers his house to his wife inreturn for paying £1 per year ground rent. The executors refused the agreement by stating thatthe consideration is not enough. It was held that consideration needs to be present, and it musthave some value in the eyes of the law, but it need not be sufficient (Thomas v Thomas).Furthermore, the essential element of the contract includes the capability of parties to create alegal contract. It means that the parties to a contract must not be minor, insolvent, andunsound. The parties to a contract must have a mutual obligation which means the obligationsof the contract must bind them.ApplicationRafia clearly asked Kalpana whether she does traditional classical Indian dance, and shereplied positively. She guarantees to Rafia that she performs most beautiful Indian dance.Both the parties were entered into a legal contract because they fulfilled the terms of thecontract. An offer was given by Rafia which was accepted by Kalpana without any changesin its terms and Rafia is authorised to act on behalf of USC. Other essential elements such asa valid consideration, competency of parties, mutual obligation and intention of parties werefulfilled as well. As discussed above, a contract can be written or oral if the parties fulfil theessential elements, therefore, the oral assurance given by Kalpana is considered as validterms of the contract, and she is bound by her assurance. Although information regarding thetype of dance or written assurance from Kalpana that it will be a traditional dance, however,she is bound by her oral assurance which she gave to Rafia.
COMMERCIAL LAW3ConclusionThus, Kalpana is bound by her oral assurance which she gave to Rafia, and it is considered asa term of the contract.
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