Case Study On: Contract Law

Course Name: Business Environment Analysis

Course Code: CC 509

Submitted By
Kazi Mohiuddin Alif
ID: 20G10016
5th batch
Dept. of Business Administration

Submitted To
Ashutosh Roy
Associate Professor
Dept. of Business Administration

Date of submission
August 6, 2020
Issue 1: Richard has a specialist car dealership. He buys old cars, refurbishes them and then sells
them. He also hires out cars.
Richard is restoring an old jeep. It requires a special type of shock-absorber to enable it to travel
over rough ground. Richard phones Shocks Are Us-a shock absorber manufacturer. He says to
Emma, the manager: “I need four shock absorbers which can be used for off-road driving.”
Emma consults a brochure published by the shock absorber manufacturer and “Says the D200
shock absorber can be used for off-road driving.” Richard then agrees to buy four D200 shock
absorbers for $ 120 each. When he installs them on the jeep and takes it for a test drive over
rough country, the shock absorbers give way and the jeep crashes down, causing $ 2000 worth of
damage to its body. It turns out that when Emma gave Richard the information over the phone,
she had been looking at the wrong page of the brochure. Had she looked at the correct page, she
would have seen that the D200 is not suitable for off-road driving.
Question: Richard bought 4 shock absorbers adapted for off road driving for his jeep paying
$480 on the suggestion of Emma, the manager of Shocks Are Us. However, when he went for a
test drive the shock absorber failed and the car crashed. The damages amounted to $2000. Now,
the question is who is liable to bear the loss. Moreover, another issue is whether Richard is liable
to get any compensation or not
Issue 2: Richard operates his business from a premise which he has leased from George for $
5000 per month since January 2016. The lease specifies that the rent is to be paid to George
every six months and that it will increase every year by 10%. Richard pays George $ 30000 in
June 2016 and December 2016, but then tells George that he is having financial difficulties and
needs every dollar he can to buy equipment. George says “OK, I will let you off paying the
increase this year”. Richard is pleased with this, and uses the money he would have had to spend
on the rent increase to buy new tools. In June 2017, Richard pays $ 30 000 to George, but
George contacts him demanding an additional $ 3000. When Richard refers to their earlier
conversation, George says “Whatever I said, the lease you signed specifies that the rent will go
up by 10% each year”.
Question: Richard has been paying a rent of $5000 per month to George as rent for using his
premises. The rent is supposed to increase 10% at the end of every six months. However,
Richard confesses in June that he would not be able to pay the increment due to obscurities in his
business, George allowed him the wave off. However, in June 2017, George rang up and
demanded extra $3000 from Richard. He disagreed to confirm to any verbal contracts and stated
that the specifications of the lease paper would hold. This may be considered a breach of contract
or not?
Issue 3: Tom is a collector of vintage cars. He sees that Richard has a 1979 Mercedes 450SEL
for sale on his website, priced at $ 20000. Tom sends Richard an email saying “I offer to buy the
1979 Mercedes 450SEL for $ 18500”. Richard sends an email back saying “Sorry, that is not
enough, but I will sell it to you for $ 19 000”. Tom sends an email back saying “No, I can’t pay
that”. Richard then sends an email saying “OK, I accept your original offer of $ 18500”, but
when he brings the car to Tom’s house, Tom refuses to accept it or to pay the money.
Question: In the third case, Tom’s initial offer of $18500 is discarded by Richard initially. In
turn he demands $19000. However, when Tom confesses that he is unable to pay the amount,
Richard agrees to accept his previous offer. Accordingly, he brings the car to Tom’s place.
However, at that time Tom does not accept the car and refuses to pay any amount. This may be
considered a breach of contract or not?
Issue 4: When Richard goes on holiday, Martin looks after his car lot. Martin doesn’t have a car.
However, a friend of Martin’s is about to visit town and he wants to be able to drive her around.
Martin goes to Richard and says “Can I hire one of your cars?” Richard says “The usual price is
$ 50 per day, but because you looked after my car lot in August, you can hire it at no cost. You
can pick it up on Monday”. Martin is very pleased and readily agrees, but when he comes to pick
up the car, Richard says that he has hired it out to a customer. Martin says that Richard has
breached their agreement.
Question: Since Martin looked after Richard’s car lot in August, Richard allowed him to borrow
a car without paying. However, when Martin goes to pick up the car, Richard says that it has
gone on hire. Martin considers this a breach of contract. This may be considered a breach of
contract or not?
Answer
A. Issue
Issue 1: Richard bought 4 shock absorbers adapted for off road driving for his jeep paying $480
on the suggestion of Emma, the manager of Shocks Are Us. However, when he went for a test
drive the shock absorber failed and the car crashed. The damages amounted to $2000. Now, the
question is who is liable to bear the loss. Moreover, another issue is whether Richard is liable to
get any compensation or not.
Issue 2: Richard has been paying a rent of $5000 per month to George as rent for using his
premises. The rent is supposed to increase 10% at the end of every six months. However,
Richard confesses in June that he would not be able to pay the increment due to obscurities in his
business, George allowed him the wave off. However, in June 2017, George rang up and
demanded extra 4300 from Richard. He disagreed to confirm to any verbal contracts and stated
that the specifications of the lease paper would hold. This may be considered a breach of
contract.
Issue 3: In the third case Tom’s initial offer of $18500 is discarded by Richard initially. In turn
he demands $19000. However, when Tom confesses that he is unable to pay the amount, Richard
agrees to accept his previous offer. Accordingly, he brings the car to Tom’s place. However, at
that time Tom does not accept the car and refuses to pay any amount.
Issue 4: Since Martin looked after Richard’s car lot in august, Richard allowed him to borrow a
car without paying. However, when martin goes to pick up the car, Richard says that it has gone
on hire. Martin considers this a breach of contract 1.
B. Laws
As per the contracts Act 1999 (section 18A) and the Sale OF Goods Act 1979 (section 14) word
of mouth may be considered as a contract. Breach of the contract is equally punishable like
breach of written contract. As evident from the Air Studios (Lyndhurst) Limited T/A
Entertainment Group v Lombard North Central PLC (2012), the loss amount is liable to be paid
by the Shocks on Us company. As per the oral modification clause of the Word of mouth Law,
Richard is liable to receive the compensation amount if he is able to substantiate his loss amount
via written documents2.
Again, in the second case a reference from the Thomas KELLOGG v. Cindy SHUSHEREBA
(2013) case may be considered. Oren was forced to pay the alleged amount in that case. By the
standards of the case Landlord and Tenant Act 1985 (Section 18), Richard is liable to pay the
extra $3000 if the house owner George approaches the court and disagrees any wave off
agreement. However, in case if Richard can produce any witness of the verbal assurance of
George, the payable amount for him may lessen 3.
Thirdly the example of the Uber v Aslam case may be cited. The appeal of the Uber drivers did
not stand in front of the employment tribunal. As per this case, the issue of not accepting the pre-
booked product may be considered. The issue is that Tom did not sign any purchase clause with
Richard. As per the Product liability and safety law it is essential to seal a contract with a buyer
at the confirmation of the purchase. Since, this was not done; the court is more likely to reject
Richard’s appeal if he rings the court4.
In order to shed light upon the final case the Bolton v Mahadeva [1972] case may be considered.
The appellant, in this case, received the contracted value minus the cost of defects. Similarly, in
this case, Martin may also appeal that Richard has not kept his words. However, considering the
frivolity of the case, the judge may ask the accused and the appellants to solve the dispute among
them.
C. Application
In the first case the Contracts Law 1999 and the Sale of Goods act 1979 may be used. As per the
section 3 of the Contracts law 1999, the promissory may save her in this case. However,
according to the Section 2 of the Contract Law 1999, the third party that is Richard may apply
that the liability of this loss lies entirely with the manager Emma. The section 5 and the section 8
of the law may also be applicable. In that case the manager has higher chances of winning this
case 6.
In the second case, as per the Article 3A of the Landlord and Tenant act 1985, Richard should
have given a written notice at least to the house owner stating his financial problem. Since no
evidence can be produced in favour of the verbal rent waving, the decision of the court is likely
to go in the favour of the landowner7. Thirdly in the case of Tom’s not accepting the act or
paying for it, the word of mouth that he had given will not be considered as unconditional assent
as per the Contract Law of UK 8. In this situation, the liability of bringing the car at the doorstep
of Tom will completely rest with Richard. Finally, in the case of Martin, the verbal offer may
also be accepted as a kind of Contract for consumer credit by the judge. In case if Martin appeals
to the court, the verbal contract of Richard with Martin may gain ground. However, since this is s
petty case, the court may suggest the mitigation of the case by mutual contract9.
D. Conclusion
This project highlights four issues which come under various law acts under the jurisdictions of
the British court. As such, the law acts that are applicable to this case have been highlighted and
verdicts of other similar court cases have been analyzed also. Under this circumstance, the
primary laws that have been applicable are the English Contracts Law, the Sale of Goods Law
and the Consumer Protection laws. The possible scenario if these issues were converted to court
cases has been discussed in detail.