Introduction

InXs limited faced a problem regarding the legality of the exclusion clause placed into contract by CP. Both the parties had a verbal agreement on price but the buyer i.e. InXs was not informed of the price fluctuation clause and the liability exclusion clause incorporated into the contract by CP. This report analyzes this case by determining the legality of the exclusion clause and the fact that whether CP’s contract prevails or not in the eyes of law. It also seeks to find out the legal procedures for dismissal of an employee and uses the legislative laws to support every finding.

Advise InXs on whether CP’s contract prevails.

When two contracting parties send in their own terms for the contract a battle of form occurs where both the parties agree that a contract exists between them but have a conflict on the point that whose terms and conditions apply. When such conditions occur, two concepts can be used to identify whether a contract prevails or not. These two concepts are counter offer and the last shot rule (Beale, Tallon, Vogenauer, Rutgers, & Fauvarque-Cosson, 2010).

Cases of many companies illustrate the use of such concepts within the law in order to reach a conclusion. One of such cases is that of Brogden v Metropolitan Railways where Brogden, the seller, added a clause to Metro’s standard form and continued to sell them coal (Seddon, 2009). Although a counter offer had been made by Brogden, the acceptance of coal by the buyer was an evidence of the fact that Metro had accepted Brogden’s offer due to which the contract prevails (Seddon, 2009). Another case that uses the concepts of last shot and counter offer is that of British Road Services v Crutchley 1968 in which BRS delivered whiskey along with a delivery note stating their terms and conditions. Crutchley received the goods and stamped the delivery note with “received under our conditions” which was an act of a counter offer from Crutchley that BRS accepted by handing over the goods due to which the contract incorporated Crutchley’s conditions rather than those of BRS according to the last shot principle (Koffman & Macdonald, 2010). Similar is the case of Butler Machine tools ltd v Ex-Cell O Corp 1979 in which the sellers signed off a slip acknowledging that they agree with the counter offer of the buyer due to which buyer’s terms and conditions prevailed in the contract.

Until now we have sufficient evidence supporting the fact that whichever party issues the last shot or the last document has actually issued a final offer and acceptance of goods after such an offer is issued shows that the offer has been accepted by the party. Now, applying this conclusion to the case of InXs and CP shows that the company secretary of InXs, the buyer, signed off the delivery of the furniture and signed the standard form of contracted provided by CP which included the price variation clause. Also, the acceptance of goods by InXs also shows an acceptance of offer according to the terms of CP. Thus keeping in mind the findings of the cases discussed above it is sufficient to conclude that CP had the last shot and their goods were accepted by the buyer which shows that CP’s contract prevails (Nebbia, 2007).

Advise InXs on the legality of the exclusion clause.

Exclusion clause of contract law holds the provision that denies any arranged obligation under certain particular events. In order to deal with the legality of the exclusion clause, two common law rules need to be considered i.e. the rule of construction and the rule of incorporation.

The rule of incorporation when initially considered, concerns and deals with exclusion and inclusion clause in a contract either through bringing it to the notice of the buyer or through writing it in the contract and having the other party’s signature on it. L’estrange v Graucob 1934 was a famous case in which the concept of incorporation by signature occurred. Ms. L’estrange bought a cigarette machine in installments from Graucob and signed the sales agreement without reading it which claimed her consent on buying on the other party’s terms. The contract had an exclusion clause which exempted Graucob from any implied condition or warranty and thus when the machine broke, Graucob argued exemption from liability. The courts also decided in favor of Graucob because L’estrange’s signature on the document ensures the incorporation of the exclusion clause. The other rule of incorporation is that of incorporation by notice which is keenly described by the case of Thornton v Shoe Lane Parking 1970. According to this case, Thornton parked his car in a parking on Shoe Lane and received a ticket saying that contract of parking was subject to the terms displayed on the premises. These terms exempted shoe lane for being liable for any injury to the customer. After a couple of hours Thornton had an accident and the courts held that this exemption clause was not incorporated because sufficient notice was not given by Shoe Lane Parking.

Secondly, the rule of construction deals with the interpretation of legal instruments. The case of White v John Warwick 1953 is a leading example of it in which the plaintiff hired a bicycle on the agreement that there is no condition that shall apply or render the owner of the bicycle liable in event of any personal injury. As consequently it was known that plaintiff experienced some injuries during the ride of bicycle in response to this the court ruled the wording of clause as ambiguous enabling the defendants a protection for strict penalties   that the wording of the exclusion clause was ambiguous due to which defendants were protected of strict contractual liability. However, they were held liable for negligence.

Companies have been using exclusion clauses to exempt themselves from any liability for a long period of time now. However in 1977 an act known as Unfair Contract Terms Act was enforced in some parts of UK to provide protection against breach of duty or liability for negligence (Lawson, 2011). Section 6(3) of this act states that any liability of implied terms can be excluded as long as it conforms to the test of reasonableness.

Thus keeping the above discussion in mind, in the case of CP and InXs the exclusion clause was incorporated by signature because InXs signed the contract provided by CP which had the exclusion clause in it. However, according to section 3(2) of The Unfair Contract Terms Act (1977), under any contract neither of the contracting parties can exclude nor restrict their liability or claim in regards to their entitlement in rendering a contractual award classified as unreasonable. To show this a reasonableness test is needed in such cases that is explained according to section 11 of the Unfair Contract Terms Act 1977. As in this case, the provision of defected goods to InXs was an unreasonable performance at CP’s end. Moreover, according to section 5 (1) and section 5(2) of the Unfair Terms in Consumer Contracts Regulations 1999, if any contract term has not been individually negotiated with the contracting party beforehand and it entails such terms which may cause an imbalance in the contracting party’s rights then such terms are regarded as unfair by the law (Lando & Beale, 2000).

If the exclusion clause were held to be invalid what course of legal action may InXs pursue.

In any binding contract, there are two kinds of terms i.e. express terms which are specifically stated in the contract. In addition to that there are some implied terms and they are genuinely not stated explicitly, however they are the obvious understanding hence are upheld by the contracting parties. Section 14 of the Sale and Supply of Goods Act 1994 states that in the course of a business, there is an implied term on the seller’s end that satisfactory quality goods would be supplied by them. If such a condition is not fulfilled then it is said to be a breach of contract. Section 14(3) expressly mentions fitness for the purpose purchased hence if the good bought for any reason is not fit for use then it will be expressly termed as a breach of contract (Legislation Dept). 

Thus as the exclusion clause is unreasonable or invalid in the case under discussion, terms may be implied into the contracts by the act of parliament. CP violated the law put forward by section 14 of Sale and Supply of Goods Act 1994 by not providing good quality, durable products and therefore InXs has the right to take a legal action against them by demanding a repair, a replacement or a refund.

Advice CP’s directors on what procedures they should have taken before dismissing Harry.

The instant dismissal of an employee is justified in the case of a gross misconduct in which the employee willfully performs an objectionable act. However, negligence or certain mistakes cannot fall into the category of a gross misconduct rather they can be regarded as a factor contributing towards poor performance. In the case of dismissal of CP’s company secretary, Harry’s act cannot be termed as gross misconduct and thorough procedures should have been taken before his dismissal.

According to section 98 of the Employment Rights Act 1996, the dismissal of an employee is considered to be unfair in the eyes of law if a prior notice to the employee is not given and a written statement of the reasons for dismissal is not provided (Collins, 2003). The section 94(1) of Employment Rights Act 1996 gives the right to the employee not to be unfairly dismissed and section 86 of the same act provides that the employee has the fundamental right to receive prior notice or warnings before his/her dismissal and abrupt termination of employees is not permitted by law. Thus the action taken by the directors of CP against Harry are unfair and they should have taken the following measures before firing Harry.

• Provide a prior notice to Harry before declaring his dismissal. Harry has the full right to receive a notice before getting fired and such an action by the company has the probability of being criticized by the court.
• A thorough investigation of the whole case to find out whether Harry was guilty or not.
• Consult advisory, conciliation and arbitration service (ACAS) in order to obtain advice for resolving this issue.
• Provide a written statement of the reasons of dismissal to Harry. The reasons should be valid enough to prove the removal of employee on just grounds.

Thus the dismissal of Harry on the grounds of gross misconduct was unreasonable and CP should have followed the rules of dismissal put forward by section 98 of the Employment Rights Act 1996. Also, taking guidance and advice from ACAS would also have helped them in understanding the laws and resolving the conflicts.

References

Beale, H., Tallon, D., Vogenauer, S., Rutgers, J. W., & Fauvarque-Cosson, B. (2010). Cases, materials and text on Contract law: Hart.

Collins, H. (2003). The law of contract: Cambridge University Press.

Koffman, L., & Macdonald, E. (2010). The law of contract: Oxford University Press.

Lando, O., & Beale, H. G. (2000). The principles of European contract law: Kluwer Law International.

Lawson, R. G. (2011). Exclusion clauses and unfair contract terms: Sweet & Maxwell.

Legislation Dept. Sale of Goods Act 1979 “Implied terms for quality or Fitness”.   Retrieved from http://www.legislation.gov.uk/ukpga/1979/54/section/14

Nebbia, P. (2007). Unfair contract terms in European law: a study in comparative and EC law: Bloomsbury Publishing.

Seddon, N. (2009). Government Contracts: Federal, State and Local: Federation Press.