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Introduction to Contract Law

Contract law is developed by the parliament of UK to assure fair and standard performance by parties. For this aspect, standard norms are described by legislation which is mandatory for compliance for all parties. In addition to this, contracting parties are not in the position to contradict these terms by insertion of expressed terms. Present study is based on evaluation of provisions of contractual obligations within their social, practical and economic contexts to determine their impact on consumer and commercial transactions. By considering these legal provisions, case issue of Rose and Sunny Hols Ltd will be answered. For this aspect, ILAC approach will be applied. For justifying recommendations in given situations previous cases will be considered.

Issue

In accordance with the described case situation, Sunny Hold Ltd had not provided satisfactory services to Rose as there were lot of dissimilarities between actual services and description in the brochure. Rose has following complaints from the management of hotel:

  • There was not private pool and children paddling pool
  • 24 hours attendant for the disabled guests
  • Guest room did not have air conditioning

On her complaint, management of hotel had pointed out the exclusion clause in brochure that “Company or their employees will not be obliged in any case for dissimilarities contained through information, representation or description provided in brochure”.

Legal provisions

Contractual obligations

Contractual obligations can be defined as duties and responsibilities which are required to be fulfilled by each party to discharge contract by the performance. These obligations vary as per the subject matter of the contract. For example contractual obligations for sale of services will be different from the rental contract. Generally, following contractual obligations are satisfied in all type of contract:

Payment: Buyer is obliged for providing payment for the goods and services rendered by the seller. This obligation will be clarified by the terms of contract as it will state payment amount and deadline for the sam

Delivery: Seller is required to provide satisfactory services as per the description in the deed of the contract. Description of delivery will be considered as per the expressed terms inserted by the parties.

Quality of goods: In accordance with the Supply of Goods and Services Act 1982, seller is required to provide qualitative delivery to the customers. Further, it must resemble the description provided by them.

In accordance with the provisions of Supply of Goods and Services Act 1982, traders are required to provide services as per the proper standard of the workmanship. In addition to this, if there is absence of specific date then it must be completed in a reasonable time and charges. In addition to this, material goods used to provide services should be of satisfactory quality. Failure of compliance of these contractual obligations will be considered as a breach of contract. Consequently, customers will be entitled to redress in necessary situations in civil courts.

Exclusion of contractual obligation

Contracting parties are in the position to reduce their obligation by inserting exclusion clause. These terms are considered as a part of the contract if it is incorporated in a proper manner and loss to the party must be covered in the description of clause. However, all exclusion clauses are not considered as fair and valid as per the provisions described under Unfair Terms in Consumer Contracts Regulations 1999. It is because; in various situations rights of customers are violated by the applicability of the exclusion clauses. On the basis of this aspect, contractual term is said to be unfair if it satisfies any one of the following criteria

  • Individual negotiation of contractual term is not done
  • Inserted term contradict the requirements of good faith
  • Inserted term by the parties had caused significant imbalance between rights and obligation to the impairment of consumer
  • Indicative described under schedule 2 of Unfair Contract Terms Act 1977

In accordance with the case decision of Director General of Fair Trading v First National Bank [2001] UKHL 52 House of Lords, good faith is not an artificial or technical concept. It is because; this approach considers merely commercial morality and practice[ McKendrick, E., 2012. Contract Law; Text, Cases, and Materials. Oxford University Press.]. This case lays down only a composite test by considering substance and formation of the contract. Furthermore, concept of fair dealing states that supplier must not (whether unconsciously or deliberately) take advantage of customer's lack of experience, indigence, necessity, weak bargaining position and unfamiliarity with the subject matter of the contract. In any of such situation exclusion will not be considered valid[ Elaw resources. 2016. Statutory implied terms - The Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982.

Regulation of this UTCCR 1998 states that if an exclusion clause is said to be unfair then it will not be considered as a part of the contract. Further, the rest of the contract will be valid and effective for the contractual obligation. By considering this aspect, it can be said that the invalidity of exclusion clause is not equivalent to the invalidity of the entire contract. Henceforth, contracting parties will be required to accomplish their performance without considering unfair terms.Remedies for the breach of contractual obligations.

Contractual law had described provisions for remedy for the innocent party to compensate their injury if satisfactory performance is not provided by the contracting party. Remedies for the breach of contractual obligations are described on the basis of bifurcation of contractual terms.

Contractual terms are statements that describe obligations of parties which are required to be satisfied by their performance. Mainly there are two types of terms i.e. expressed terms and implied terms. Expressed terms are inserted by the mutual will of parties to describe their promise. Further, bifurcation of expressed terms is done in conditions, warranties and innominate terms. Description of these terms along with its impact of breach is as follows:

Conditions

Conditions are the most important terms of the contract to be performed by the parties. If conditions of the contract are not satisfied, then innocent party are in the position to repudiate entire contract and further they can sue faulty party for the claim of damages. In the case of Poussard v Spiers (1876)[ 1 QBD 410], employee had breached the conditions of the contract due to which she was replaced as employer had terminated his contract. In this case, court had held that conduct of employer is justified because breach of condition is referred to the breach of contract.

Warranties

Warranties are the minor terms of the contract as it does not link to its central existence. If contracting party is not able to satisfy warranties of the contract, then aggrieved party can only claim damages but they are not in the position to terminate the entire contract. According to the case precedent of Bettini v Gye 1876, employee had breach the warranty of contract and her employer had terminated the contract. In this case, court of law had stated that breach of warranties do not provide entitlement to the innocent party to end the contract as they have only right to make claim damages.

Innominate terms

Approach of innominate term has been developed from the case of Hong Kong Fir Shipping v Kawasaki Kisen Kaisha. In accordance with this case, innominate approach should be considered for breach instead of classification of terms in conditions and warranties. In accordance with this approach, innocent party will be entitled for the breach of entire contract only if they are substantially deprived from the entire benefit.

Application of legal provisions

In accordance with the given case scenario, it can be said that contractual obligations of hotel has provided satisfactory services to the customers in accordance with the description provided in brochure. In addition to this, they are not entitled to exclude their liability regarding the terms which will contradict the fundamental rights of the customers. Provisions of Supply of Goods and Service Act 1982 states that seller is required to deliver the services in accordance with the description provided at the time of sale.

By the applicability of above described provisions it can be said that exclusion clause inserted by hotel management is not valid. It is because, it is contradictory to implied terms described under SGSA. This aspect is also supported by case decision of Director General of Fair Trading v First National Bank. It is because; management of hotel had taken benefit of weak bargaining position of the customers. Justification of this statement is obligation in dissimilarities in actual services and standard services in brochure is excluded by the insertion of exclusion clause which is completely unfair to the customers[ Zoll, F., 2012. The binding power of the contract: Protection of performance in the system of the Common European Sales Law. Journal of International Trade Law and Policy.Insertion of such terms reduces their right to claim damages in situation where they are not satisfied with the provided services of the organization. On the basis of this aspect, exclusion clause inserted by hotel will not be considered as a part of the contract.

In accordance with the regulation 8 of Unfair Terms in Consumer Contracts Regulations 1999 contract between parties will be continued for completing the performance. Case facts of the provided scenario show that there is a breach of warranty on the part of management of hotel as they fail to provide services in accordance with the description given in brochure. However, Rose is not entitled to terminate entire contract on the basis of breach of warranties.

Conclusion

As per the described legal provisions, it can be said that Rose is entitled to claim for the compensation for the non-satisfactory performance on the part of management of hotel. However, compensation of entire return is not justified as ancillary terms were not satisfied. On the basis of provisions of Unfair Terms in Consumer Contracts Regulations 1999 exclusion clause inserted by hotel in contractual deed will not be considered valid because it is in contradiction with the legal provisions. Thus, management of hotel is not in the position to take benefit of that clause for reducing their contractual obligation.

References

  • Clarkson, K.W., 2010. Business law. Text and Cases: Legal. Cengage learning.
  • Lando, O., 2003. Principles of European contract law. Kulwer law international.
  • McKendrick, E., 2012. Contract Law; Text, Cases, and Materials. Oxford University Press.

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