BUS 850 Business Law

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Information about BUS 850 Business Law

Published on February 28, 2014

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BUS 850 Business Law
Questions and Answers

Question 1 In what ways may an offer expire before acceptance? The various ways in which an offer expires before acceptance are: 1. Lapse of time: By non-acceptance within the time prescribed for acceptance by the offeror. 2. When no time for acceptance is prescribed, by non-acceptance within a reasonable time. What is a reasonable time depends on the nature of the contract and the circumstances of the case. Ramsgate Victoria Hotel Co. V. Montefiore (1866). The reason why the offer lapse is that the offeree is regarded as having refused it if he has not accepted it within a reasonable time. Unless he is paid just to keep it open. 3. On the death either of the offeror or the offeree before acceptance. The general rule is that death of either offeror or offeree causes only outstanding offer to lapse. Reynolds v. Athertion (1912). Death after acceptance does not affect the obligations arising from a contract unless they are of a personal nature - Kennedy v. Thamassen (1920). Question 2

On the 24th of January 2004, I Must Pass Drama Group entered into a contract with Hotel Deganga whereby the Hotel would make its Hall available for the group's annual drama fiesta scheduled for the 1st of December 2004. The Hotel requested and obtained full payment in advance. On the 13th day of November, a mysterious fire destroyed the entire Hotel premises. The group proposes to take legal action to enforce the performance of the contract. Advise the parties. The issue here is about frustration of contract. The principle is when common object of the contract can no longer be achieved because in the light of the circumstances, a situation fundamentally different from that contemplated, when the parties entered into the contract, has unexpectedly emerged, the contract is at an end, otherwise the parties would be bound to perform a contract which they did not make. Circumstances in which the contract is frustrated are: 1. Where basis is destroyed, if the contract depends on the continued existence of something, and that thing is destroyed: Taylor v. Caldwell (1863).

2. Where there is non-occurrence of an essential event. If the contract depends on the occurrence of an event, which does not in, fact happen - Krell v. Henry (1903). 3. Where there is death or illness – Robinson v. Davison (1871) 4. Where there is a change in law – Avery v. Bowden (1856). 5. Where the method of performance is impossible. If a particular manner of performance is essential, and when the time comes for performance this particular method has become impossible Davis Contractors Ltd. V. Fareham (1956). Applying these rules of law to the case of I Must Pass Drama Group, the destruction of the essential object by mysterious fire outbreak, a condition is implied that the impossibility of performance arising from the destruction of the Hall have excused the performance. As was illustrated in Taylor v. Caldwell (1862). Caldwell let a music-hall to Taylor for a series of concerts on certain days. The music - hall was burnt down before any of the days arrived. Held, Caldwell was excused from performance. EFFECT OF FRUSTRATION: The contract is discharged for the future (i.e. from the date of the frustration event), but it is not void ab-initio. The

remedies available to both parties (i.e. I Must Pass Drama Group V. Motel Deganga) are: Money paid before frustration is prima facie recoverable. Money due before frustration ceases to be payable Benefits received before frustration must be paid for, and a party who has incurred expense before frustration is entitled to compensation therefore.

Question 3 Discuss in full any three (3) of the following (a) Mistake (b) Misrepresentation (c) Illegality (d) Remedies for breach of contract (e) Duress and undue influence (a) Mistake The term mistake is used in Contract Law to describe the situation in which one or both parties to an agreement acted under an untrue belief about the existence or non-existence of a material fact. Mistake may be one of three-type namely common mistake, mutual mistake and unilateral mistake. Common mistake arises when both parties make the same mistake. The intentions of both parties are known to each other. In other words, the parties have in fact reached an agreement but each is mistaken as to some fact, which lies at the basis of the contract. Scott V. Coulson (1903). Mutual mistake is where the parties misunderstand each other. The parties are at cross-purposes and there is no correspondence of offer j and

acceptance. For example, A makes an offer to B about his Peugeot 504, and B accepts thinking that A is referring to Peugeot 505. There is no consensus ad idem Raffles V. Wichelhaus (1864) Unilateral mistake is when only one of the parties is mistaken and the other party knows that mistake. Lewis V. Averav (1971) and Philips V. Brooks (1919). (b) Misrepresentation:- is a false statement of material fact, made by a party to the contract or his agent, which induces the other party to enter into the contract. Misleading conduct may also amount to misrepresentation, if it presents a misleading picture about material facts and satisfies the points above. Ward V. Hobbs (1878). Misrepresentation is relevant to a contract only if it satisfies the following: (i) The statement must have been intended to be acted upon and must actually have induced the other party to make the agreement Horsfall V. Thomas (1862). (ii) The statement must: be of fact, not of Law or opinion Brown V. Raphael (1958). (iii) It must be of material importance in the transaction. (iv) It must be made by a party to the contract or his agent, i.e. not by a mere bystander Candler V. Crane Christmas (1951)

(v) It must be by positive words or conduct, not by mere silence the silence amounts to active concealment of facts. R.V. Kylsant (1923). There are three types of misrepresentation in Law viz: a. Innocent misrepresentation. b. Negligent misrepresentation and c. Fraudulent-misrepresentation - Derry V. Peek (c) Illegality An illegal contract is one which is void because (a) it is for an illegal purpose, or (b) it is contrary to some rule of public policy. The courts will generally give the parties to such contracts no protection at all- Parkinson V. College of Ambulance Ltd. 1925. The following contracts are illegal:Contracts tending to injure the public service. Contracts tending to impede the administration of justice. Contracts to commit a criminal offence or a civil wrong. The consequences of illegality are: - The contract is entirely void. Berg V. Sadler (1937). Money paid or property transferred under an illegal contract cannot be recovered. Ex turpi causa non oritur actio (from an evil cause, no action arises): Alexander V. Rayson (1936).

Negotiable securities such as cheques and other bills of exchange transferred between the parties to the contract are void as between them. But an innocent third party who acquires such securities in good faith and for value can usually enforce them. Remedies for breach of contract: Breach of contract occurs where one party: a. Repudiates his obligations; b. Disables himself from performing his part of the contract; c. Fails to perform his part of the contract as and when agreed.

When a contract is broken, the injured party may have several courses of action open to him. These are: a. To refuse further performance of the contract - Howe V. Smith (1884). b. To bring an action for damages: - Tompson Ltd. V. Robinson (Gunmakers) Ltd. c. To sue on a quantum meruit: where there is a breach of contract, the injured party, instead of suing for damages, may claim payment for what he has done under the contract. Planche V Colburn (1831). d. To sue for specific performance:- instead of, or in addition to awarding damages to the injured party, a decree for specific performance may be granted:- Beswick V. Beswick e. To sue for an injunction:- An injunction is an order of the court restraining a person from doing some act. It will be granted to enforce a negative stipulation in a contract where damages would not be an adequate remedy: - Metropolitan Electric Supply Co. V. Ginder (1901). Duress and undue influence Duress arises when a party is induced to enter a contract by force or by threat of force. In this event, consent is not freely given and hence such contracts are voidable at the option of the party under coercion Kaufman Vs. Gerson (1904)

Undue influence is when a party enters into a contract as a result of some undue pressures. This will occur where the relationship between the parties is such that one had a dominant position over the other. Examples of such positions may exist in cases of patient and doctor, parent and child, solicitor and client, religious adviser and disciple etc. Question 4 Mr. Tunde appointed Peter, an amateur salesman, as agent to handle the sale of second hand motorcycles earlier imported into the country: It was agreed that Peter should use his best endeavours to promote sales and that he would be paid N2, 000.00 per month plus 5% commission on sales. At the end of the first month Peter had sold only one motorcycle, even though he was always in the store.

Mr. Tunde refused to pay him, blaming the slow sales on Peter's incompetence, during the second month Peter began to hire out some of the motorcycles to operators who paid him some money at the end of each day. This was not disclosed to Mr. Tunde. Peter also fell into the habit of leaving his shop in the care of his younger brother while he (Peter) went about other businesses. Advise both parties on their respective rights and obligations. This issue is about rights and duties between Principal and Agent. The duties of the principal are: To pay the agent the commission or other remuneration agreed. To indemnify the agent for acts lawfully clone and liabilities incurred in the execution of his authority. On the other hand the duties of the agent are: To exercise due diligence in the performance of his duties and to apply any special skill which he professes to have. To render an account when required. Armstrong V. Jackson

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