Business Law Notes

Business |Law notes Contract and Tort and others acts of law

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Contract law and the Sale of Goods act 1979
1. Contract law: introduction:
A contract can be described as a legally enforceable agreement between two or
more parties. If a party to a contract breaks part of the agreement (and consequently
breaches the contract) the other party can sue them through the civil courts and
seek compensation (also known as damages) for any losses caused by the
Everyday contracts are not usually in writing or in any formal format such as buying
goods or getting your hair cut and we enter hundreds of these contracts throughout a
Some contracts must be in writing such as those involving the sale of land or
consumer credit contracts (we will be looking at consumer credit contracts later on
in the module).
Generally in commercial environments it is preferable to put terms agreed between
the parties in writing. This is because there may be complex arrangements between
the parties and the terms will be evidence of what was agreed, how things are to be
undertaken, who is responsible for what, timings, payment, termination and any
number of other issues.
Businesses make contracts all the time with their suppliers, customers, employees
and advisers so it is vital that they pay due attention to the terms of the contracts
they are entering into as breach by either party may lead to severe consequences.
Knowledge of contract law is also very useful in everyday life as discussed above
equipping you with the knowledge of what to do if goods you have bought from a
shop prove to be defective.
4 elements of a contract:
1 Offer
2 Acceptances
3 Considerations
4 Intentions to create legal relations

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The Offer ­
A clear statement by one party of the terms on which they are willing to make a
There are complex rules around making an offer. They must be clear,
communicated to the other party, may be time limited or made subject to conditions.
They must be distinguished from invitations for offers. An advertisement in a
magazine or newspaper may be just an invitation as will goods on display in a shop
or supermarket window.…read more

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On the point of consideration not having to be adequate we have only to look at the
sale of Barings bank to a Dutch bank for £1 after the Nick Leeson fiasco resulted in
the downfall of the merchant bank. The £1 represents consideration for the terms of
the agreement to buy it.
Intention to create legal relations ­
Parties to a contract must intend to mean business.…read more

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Express terms ­ identified and agreed between the parties in writing or orally
Implied terms ­ implied into certain types of contracts. They can occur in 3 ways:
By custom or trade usage ­ e.g. trade guidelines such as ABTA
By the courts ­ to give a contract `business efficacy' (make it workable)
By statute see Sale of Goods Act later on e.g. implied terms as to fitness
for purpose and so on.
2.…read more

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Contractual terms are defined as either
(a) conditions or
(b) warranties (promises)
A condition is a major term of a contract, breach of which will entitle e.g. the B to
end the contract and reject the goods. These terms are integral to the contract.
Warranties are minor terms of the contract (not to be confused with `warranties'
meaning a guarantee).…read more

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S14 (2) Implied condition that the goods are of `satisfactory quality'.
This means that when a S sells in the course of business (not a private sale), the
goods must be of a satisfactory quality.…read more

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B can still make a claim e.g. if the goods are of unsatisfactory
quality. But if something is sold as shop soiled and the price reflects this and you
buy it you may not later be able to reject it.
Remedies available for the buyer
Reject goods ­ if a condition is breached and end the contract and claim
for the full purchase price. This must occur within a reasonable time, usually a
few weeks.…read more

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Supply of goods and services
Product liability
1. Supply of Goods and Services Act 1982 (SGSA)
This Act applies to all goods supplied under a contract of hire or a contract for
goods and services. The main practical distinction from the Sale of Goods Act is
the element of services supplied. Goods may also be specifically manufactured or
produced for a customer and the Act would also apply to these.
SGSA applies to contracts for:
The supply of services only e.g.…read more

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Where SERVICES are supplied the following terms are implied into contracts:
S.13 the supplier will carry out those services with reasonable skill and care
S.14 the supplier must carry out those services within a reasonable time (unless
this has already been set out in the contract).
The important thing to note is that the above terms are not classified as either
conditions or warranties so much will depend upon the seriousness of the breach
and therefore turn on the facts of the individual case.…read more


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