Chapter 7 - Terms of the Contract

By Charlie Lawrence,2014-05-15 16:21
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Chapter 7 - Terms of the Contract

    Chapter 7 - Terms of the Contract

Terms Implied as a Matter of Law

    By Statute

Terms Implied by the Sale and Supply of Goods to Consumers Regulations 2002

    In addition to the amendments to the Sale of Goods Act 1979, as set out earlier, these regulations also provide additional rules regarding the enforceability of consumer guarantees offered by manufacturers or retailers. A „consumer guaranteeā€Ÿ means “any undertaking to a consumer by a person acting in the course of his business, given without extra charge, to reimburse the price paid or to replace, repair a handle consumer goods in any way if they do not meet the specifications set out in the guarantee statement or in relevant advertising” (Reg. 15(2)).

    By regulation 15(1) such guarantees take effect as contractual obligations at the time the goods are delivered. The contents of such guarantees must be set out in plain intelligible language and must set out the necessary information required for making claims under the guarantee, particularly the duration, geographical scope of the guarantee, as well as the name and address of the guarantor (Reg. 15(2)). Furthermore, in relation to consumer goods offered for sale within the United Kingdom, the guarantor must ensure that the consumer guarantees are written in English (Reg. 15(5)).

    Regulation 15 is wide sweeping in that it applies, not just to the guarantor, but also to any other person who offers goods to consumers which are the subject of the guarantee either by way of sale or supply (Reg. 15(4)). A guarantor, on the request by a consumer, must make the guarantee available and accessible to the consumer in writing or another durable medium within a reasonable time (Reg. 15(3)).

    If the guarantor fails to comply with paragraph (2) or (5) above, or a person to whom paragraph (4) applies fails to comply with paragraph (3), then the enforcement authorities pay for an injunction against that person requiring him to comply (Reg. 15(6)) and the Courts can grant this injunction on such terms as it thinks fit (Reg. 15(7)). By regulation 2 an “enforcement authority” means the Office of Fair Trading, every Weights and Measures authority in Great Britain, and the Department of Enterprise Trade and Investment for Northern Ireland.

Chapter 10 - Mistake

Mistake as to the Person Contracted With (page 214)

Shogun Finance Ltd v Hudson.

    The facts of this case can be seen on page 216. The Court of Appeal decision in this case was upheld in the House of Lords (Lords Nicholls and Millett dissenting). (Shogun

    Finance Ltd v Hudson [2004] 1 All ER 215)

    Lord Hobhouse gave the leading judgement and stated that the relevant question is whether the rogue was the debtor under the hire purchase agreement relating to the car. Mr Hudson considered he was, whilst the finance company considered otherwise. He stated that the agreement emphasised that the customer/hirer could only be the person named on the front of the document; that the agreement was the written agreement contained in the written document; the offer being accepted by the creditor is that contained in the written document, that is the offer of Mr Patel; that for the offer to be made the form had to have been signed by Mr Patel; and most importantly the question in issue revolves around the construction of the written document alone.

    Taking each point in turn Lord Hobhouse considered that the document refers to nobody else but Mr Patel. The finance company was only willing to do business with the person identified in the written document and no one else. This is what the rogue expected since the company was willing to deal with Mr Patel but not with the rogue. Lord Hobhouse considered that Sedley LJ in the Court of Appeal was wrong in concluding that this was a case of a rogue using an alias "to disguise the purchaser rather than to deceive the vendor as seen in the case of King's Norton Metal Co. Ltd v Edridge, Merrett & Co. Ltd". Thus it is Mr Patel who is the debtor not the rogue. Of course it is not disputed that the rogue had no authority to deal on behalf of Mr Patel, nor that he was Mr Patel. Mr Hudson dealt with this issue by stating that it was the rogue that came into the showroom was not Mr Patel. Mr Patel knew nothing of the agreement, had not signed the agreement and therefore Mr Patel could not be the debtor. Lord Hobhouse considered that this was an attempt to adduce oral evidence in order to overturn a written agreement. He did not consider that this was possible where a party is specifically named in the agreement. In arriving at this conclusion he referred to the case of Hector v Lyons (1988) P & CR 156, which was also referred to in the Court of Appeal.

    The case of Hector v Lyons concerned the purchase of a piece of land in which Mr Hector Senior negotiated with Mrs Lyons. Originally they negotiated over the telephone and then on a face to face basis. In fact Mr Hector Senior was negotiating on behalf of his son because he was under age. In due course Mr Hector Senior instructed his solicitors to act for him in his son's name and in due course contracts were signed and exchanged. The name of Mr Hector Junior was given as the purchaser and Mr Hector Senior signed in his son's name. Mrs Lyons then failed to complete the sale and Mr Hector Senior brought an action for specific performance in his own name. His action failed on the basis that there was no contract with Mr Hector Senior. The identity of the parties was established by the

    names in the contract - Mrs Lyons and Mr Hector Junior - as held by Lords Woolf and Browne-Wilkinson. Mr Hudson contended that this decision was wrong and should be overruled; however in the present case Lords Hobhouse, Phillips and Walker considered the decision to be correct. Lord Browne-Wilkinson in Hector v Lyons was very clear about the distinction between contracts concluded in a face to face sale and those concluded in writing. In a face to face sale he stated that the law is well established in that the mere fact that the vendor is under a misapprehension as to the identity of the person in front of him does not in itself render the contract void for mistake. This type of mistake is one as to the attributes of the person with whom he is dealing - a mistake as to his credit worthiness - which may be voidable for misrepresentation. The only time a contract becomes void for a mistake as to identity is when the identity of the person contracted with is “of a direct and materiality in inducing the vendor to enter into the contract”. He went on to state:

“In my judgement the principle [there enunciated] has no application to a case such as the

    present where the contract is wholly in writing. There the identity of the vendor and of the purchaser is established by the names of the parties included in the written contract. Once those names are there in the contract, the only question for the court is to identify who they are.”

Lord Woolf concurred with this position:

    “Parties to the contract are normally to be ascertained from the document or documents containing the contract. There can be limited circumstances where it is possible to allow oral evidence to be given in relation to a written contract, but those circumstances are recognised as being exceptional and should, in my view, be strictly confined…”

    Where does this leave Mr Hudson? Since Mr Patel was named in the agreement he was a party to it. The delivery of the car to the rogue was wrongful since the dealer only had the authority of the finance company to delver it to Mr Patel and no one else. By delivering to the rogue was a tortious act, even though the dealer had acted under an innocent mistake induced by the fraud of the rogue. The exception contained in the Hire Purchase Act s.27 only protects a purchaser from a debtor. The debtor here is Mr Patel, but of course he did not sell the car to Mr Hudson. This was done by the rogue. Essentially the rogue was a thief, who had no title to the car and could not therefore confer any title on Mr Hudson nemo

    dat quod non habet. Mr Hudson was therefore liable to the finance company for the value of the car.

    Where does this leave the law as regards mistake as to identity? Lord Hobhouse did not consider this to be an issue basing his judgement on the issue of the construction of a written contract. Lords Phillips and Walker however considered that the present law as to mistake as to identity was correct. The presumption that in a contract made face to face (and possibly in telephone conversations) the offer (or in an appropriate case the acceptance) was made to the person present whoever he or she was, as in Phillips v Brooks [1919] 2 KB 243. They considered that Ingram v Little was wrongly decided, something which lawyers for many years have considered to be the case. The presumption however did not apply in written contracts, since the offer and acceptance was derived from the

    written correspondence. In such cases where the rogue passes himself or herself off as an existing individual or company of reputable standing the offer is intended to be with the individual or the company not the rogue, as held in Cundy v Lindsay (1878) 3 App Cas 459.

    The dissenting judges, Lords Nicholls and Millett, considered that it was unsatisfactory to decide the issues by reference to the mode by which the contract was concluded. The notion that there was a difference between mistake as to identity and mistake as to attributes was untenable and that the face to face presumption should be abolished. A person should be deemed “to intend to contract with the person with whom he is actually dealing, whatever mode of communication” (per Lord Nicholls). On this basis both their

    Lordships considered that Cundy v Lindsay was wrongly decided and should no longer be followed. In some respects the arguments put forward by Lords Nicholls and Millett are attractive propositions since here the vendor will bear the loss. This is considered to be fair since, given that the vendor and third party are both innocent, the vendor is not only usually better to bear the loss but also it is the vendor who has taken the risk of parting with the goods without recovering payment for them.

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