Business Law BUS2010: An Analysis of the Charlie and Nell Case

This case study examines a contractual dispute between Charlie and PHOCCI, focusing on the validity of the contract, potential breaches, and the rights and obligations of each party. The analysis covers aspects of misrepresentation, standard form contracts, and the enforceability of agreements. It assesses whether a valid contract exists given Nell's promises on behalf of PHOCCI, and considers the implications of an 'entire agreement clause'. The document also explores the potential for a contract between Charlie and his sibling, and analyzes the court's perspective on Nell's promise of extra time for payments. Finally, it provides practical suggestions for both parties to avoid litigation, emphasizing communication and negotiation. Desklib offers a wealth of resources, including similar case studies and solutions, to support students in their academic pursuits.

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Instructor: Tom Rock 1
Case Assignment #1 - ‘Charlie and Nell’
Students’ Names
Institutional Affiliation

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Table of Contents
Question 1: Suggestions for Charlie before Entering the Contract with PHOCCI..........................3
Question 2: Standard Form Contracts..............................................................................................3
Question 3: Was there a Valid Contract between Charlie and PHOCCI?.......................................4
Question 4: Assuming there is Contract between Charlie and PHOCCI, was there Breach? What
are the Rights and Obligations of Parties when this Breach Occurs?..............................................4
Question 5: What Plaintiff must demonstrate to Court to Succeed in Action for Breach...............5
Question 6: Is there a valid Contract between Charlie and his younger Sibling?...........................5
Question 7: How the Courts would view the Promise by Nell of extra time..................................5
Question 8: How a judge would view the ‘Entire Agreement Clause’............................................6
Question 9: Suggestions for both parties in order to avoid litigation..............................................6
Bibliography....................................................................................................................................8
Articles........................................................................................................................................8
Books...........................................................................................................................................8
Cases............................................................................................................................................8
Legislation...................................................................................................................................8

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Question 1: Suggestions for Charlie before Entering the Contract with PHOCCI
Charlie’s conversation with Nell is of much importance in responding to this question. He listens
to the representative of the company and agrees to her suggestions, going ahead to sign the
written agreement to check whether what was promised is indeed included. To begin with,
Charlie should have talked to his lawyer before signing the agreement.
In the law of contract, there are statements made by the parties; these may amount into either
terms or mere representations, also called trade puffs (Anson, Beatson, Burrows, & Cartwright,
2010). Where a conflict arises concerning the issue of written and oral terms, the written ones
prevail as was decided in the Pacific Paragon case (Paragon Energy Corp v United States, 1981).
With this knowledge, Charlie should have made sure to check all contractual documents and
examined what was written in it as terms and also what warranties he had. As it is, should he file
a suit it would be hard for him to get his claim if at all the courts are to follow the guideline in
Pacific Paragon case?
Even then, when a party has special knowledge or appears to guarantee its statements then they
amount into terms. Both these are expressly shown by Nell on behalf of PHOCCI. Charlie should
have been advised to insist that the terms discussed with Nell be incorporated into the contract
before tending his signature. If he’d done that then it would have been a condition; in which case
he would have implied rejection (Hyde v Wrench, 1840) of the written agreement presented to
him.
Question 2: Standard Form Contracts
Standard form contracts are pre-written contracts drafted by one party and offered to another to
either accept or reject. These type of contracts have not been negotiated before by the parties. An
examples is a lease agreement. It may be used in situations like these by a court to remedy a
party over an inequity, for example where a penalty clause in the contract makes it hard for a
party to fulfill its part of the agreement, as implied by various statutes (for instance the Fair
Trading Act of 1986).

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Question 3: Was there a Valid Contract between Charlie and PHOCCI?
An offer followed by an acceptance usually characterize a contract. PHOCCI made an offer to
Charlie which he accepted. There are also terms and representations, where for terms, as
explained above written ones override contradictory oral ones. PHOCCI have a clause in their
standard form agreement with Charlie that the written document supersedes all previous
understanding between the parties regarding the subject matter. This then means that the
statements made by Nell become mere representations, which were only used to convince
Charlie to enter contract but they are not part of the agreement, as contrasted with (Carlill v
Carbolic Smoke Ball Co, 1893).
The law, however, has a remedy for inequity in misrepresentation. Statements made by a party
may amount into fraudulent misrepresentations if (Tuner, 2014).
 They were made as statements of fact and not mere opinions,
 It was used by one party to induce the other to enter contract and
 There is dishonesty in the making of the statement.
The motive of making the statement does not matter much once dishonesty is established. Nell in
this case clearly made dishonest statements with regard to the support offered by PHOCCI to
franchisees. It is a statement of fact, that they provide 110% support, which is false. She also
goes ahead to assure Charlie of profits and even gives him a print-out showing estimated profits,
which do not work out. These are statements of fact made in dishonesty and that played a huge
role in convincing Charlie to contract with PHOCCI.
In conclusion, a contract does exist between Charlie and the company but it is voidable at
Charlie's option due to the vitiating factor of both fraudulent and negligent misrepresentation.
Question 4: Assuming there is a Contract between Charlie and PHOCCI, was there
Breach? What are the Rights and Obligations of Parties when this Breach Occurs?
A breach of contract occurs when a party fails to fulfill their obligation in the contract without a
legal excuse (Miller & Hollowell, 2010). A breach can either be anticipatory or actual. An actual
breach entails a party failing to do their obligation in time as with Charlie in this case. He fails to
pay both the royalties and the gross weekly contribution. If everything else in the body of the
agreement were fine then Charlie would have been in breach of contract. However, he has a

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legitimate, legal excuse because there was a vitiating factor in the form of fraudulent
misrepresentation. It is PHOCCI who are in actual breach for failure to honor their obligation to
incorporate the whole negotiation into the standard form contract.
When this type of breach occurs, the offending party may pay the victim compensation in
damages. Alternatively, the contract is voidable at the option of the victim party (as in Bisset v
Wilkinson, 1927).
Question 5: What the Plaintiff must demonstrate to Court to Succeed in Action for Breach
There is a number of things that the plaintiff must do. First, he must demonstrate that the contract
was legally binding upon the parties. Second, he must demonstrate that he did his part of the
contract obligations. Third, he must show that the defendant actually failed to do their duty. He
also must have suffered a form of loss as a result of this breach (Western Distributing Co. v
Diodosio, 1992). Lastly, he must have notified the defendant of the breach before bringing the
matter before the court. The degree, as in every civil case is on a balance of probabilities, by the
plaintiff showing that it was more probable that his claim happened (Irwin Law, 2019).
Question 6: Is there a valid Contract between Charlie and his younger Sibling?
For a contract to be formed, there must be an offer followed by its acceptance. Charlie makes an
‘offer' to the sibling that he shall give 10% ownership of the business as soon as the business got
‘off the ground'. However, an offer must be clear without ambiguity, and should be one that
gives rise to a legal relationship, not just a social invitation (Turner, 2014). Also, there must have
been an intention by the parties to be legally bound by the agreement.
In this case, yes Chris makes an "offer", which the sibling accepts. However, it is an ambiguous
statement to say when the business gets "off the ground". Offers must be clear. Furthermore, the
parties do not show the intention to be legally bound by the agreement, as such there is no
contract between the two.
Question 7: How the Courts would view the Promise by Nell of extra time
When the actions of a party in failure to fulfill their obligations of a contract are seemingly
“ratified” or if the parties agree to change terms, then there is no breach of the contract. Such

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actions amount into ‘amendment’ of the terms of the contract. This means that new terms have
been created (Sysintellects, 2019).
In this case, a claim by PHOCCI that Charlie continues to pay the amount cannot be accepted
because they have agreed to an amendment of the terms of the contract, which in essence creates
a new contract. Under estoppel, PHOCCI can be barred from expecting Charlie to make the
payments on the initial basis because he is relying on a promise by this company to have more
time to pay (Central London Property Trust v High Trees House Ltd, 1947).
However, the courts can apply a reasonable time if it is a question of when the payment should
be made.
Question 8: How a judge would view the ‘Entire Agreement Clause’
The entire agreement clause is a term of the contract which is binding to the parties. It
demonstrates an intention by PHOCCI to make this a standard form contract not bound by any
agreements outside the writing.
However, a judge would view this clause as inequitable. The courts, albeit reluctantly, do from
time to time imply terms into a contract to give effect to the intention of the parties (Turner
2014). Charlie obviously has the intention to sign an agreement consisting of Nell's promises,
and although he signed a contract, on the contrary, a judge would come to his rescue and imply
other terms to give the effect that the intention of the parties requires.
Question 9: Suggestions for both parties in order to avoid litigation
The two parties would first need to determine, each for themselves, what they think they must be
entitled to in the contract. They would need to put this in formal writing to each other for clear
communication. They would then need to source for the legal help of lawyers whom they must
require to be considerate and not maintain hard stances because like the contract before it this is
a negotiation (Lewicki, Saunders, Minton, Roy, & Lewicki, 2011). This would be hard, but they
must consider the amount of money and time they’d save themselves by avoiding litigation or
arbitration.
A one on one meeting should follow between Charlie and a representative of the company. Here
the negotiations should take place, with both parties remaining objective. If the first negotiation

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fails then the parties should keep in contact and arrange another session perhaps after rethinking
their choices. If both parties maintain honesty and objectivity then by this method they should
come up with a solution away from the expensive, tedious and time consuming rigors of the
court processes.

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Bibliography
Articles
Sysintellects (2019) Contract Amendment | Why Contract Amendments are important? Retrieved
29 May 2019, from https://www.contractexperience.com/resources/contract-
amendment.html
Irwin Law. (2019). Balance of probabilities. Retrieved 29 May 2019, from
https://www.irwinlaw.com/cold/balance_of_probabilities
Books
Anson, W. R., Beatson, J., Burrows, A. S., & Cartwright, J. (2010). Anson's law of contract.
Oxford University Press.
Lewicki, R. J., Saunders, D. M., Minton, J. W., Roy, J., & Lewicki, N. (2011). Essentials of
negotiation. Boston, MA: McGraw-Hill/Irwin.
Miller, R. L., Hollowell W. E., (2010), Cengage Advantage Books: Business Law: Text and
Exercises, 6th edition, Cengage Learning
Turner, C. (2014). Unlocking Contract Law. New York, USA: Routledge.
Cases
Bisset v Wilkinson [1927] AC 177.
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.
Central London Property Trust v High Trees House Ltd [1947] KB 130.
Hyde v Wrench [1840] EWHC Ch J90.
Paragon Energy Corp v United States 648 f.2D 966 (Fed. Cir. 1981).
Western Distributing Co. v Diodosio 841 P.2d 1053.
Legislation
Fair Trading Act, 1986.