Introduction
This essay examines the legal issues arising from Mike’s interactions with New Carwash Company Ltd (NCC) and his niece Patty, within the framework of English contract law. Mike, who operates a car repair garage, sought to purchase an automatic car wash from NCC, leading to disputes over pricing and performance. Additionally, a separate issue emerges with Patty regarding payment for her work. The purpose of this essay is to advise Mike on his legal position concerning the contract with NCC, including the implications of pricing errors, acceptance of terms, and the machine’s performance, as well as his obligation to pay Patty. The analysis will focus on key principles of contract formation, mistake, and consideration, drawing on relevant case law and legal doctrines. The essay is structured into sections addressing the NCC contract, Patty’s claim, and a conclusion summarising the key arguments and their implications for Mike.
Contract Formation with NCC: Offer, Acceptance, and Mistake
The initial interaction between Mike and NCC raises questions about the formation of a binding contract. Contract law under English law requires a clear offer, acceptance, consideration, and intention to create legal relations (Adams, 2016). On 6 January, Olga, on behalf of NCC, quoted a price of £55,000 for the Deluxe model during a phone call, followed by an email mistakenly offering it for £50,000. Mike’s response on 8 January, via email and a subsequent phone confirmation, appears to constitute acceptance of the emailed offer. However, the pricing discrepancy introduces the issue of unilateral mistake.
A unilateral mistake occurs when one party is mistaken about a fundamental term of the contract, such as price, and the other party is unaware of the error. In Smith v Hughes (1871), the court held that a contract remains binding if the non-mistaken party reasonably believes the offer reflects the true intention, unless the mistake is induced by misrepresentation or the other party knew of the error (Peel, 2015). Here, Mike was unaware of Olga’s error and reasonably relied on the emailed price of £50,000, especially as it was lower than competitors’ prices. Therefore, NCC’s mistake is unlikely to void the contract, and the agreed price should arguably stand at £50,000.
However, NCC later demands £55,000, and after negotiation, accepts £40,000. This subsequent agreement to reduce the price may be seen as a variation of the original contract. For a variation to be enforceable, it must be supported by consideration (Beatson, 2016). Mike’s payment of £40,000 by 28 January, as agreed, likely satisfies this requirement. NCC’s renewed demand for £55,000 on 1 February is therefore problematic, as they have already accepted the reduced sum in full settlement, potentially estopping them from claiming more under the principle in Central London Property Trust Ltd v High Trees House Ltd (1947).
Incorporation of Terms and Conditions
Another issue arises regarding the incorporation of NCC’s standard terms and conditions, specifically Clause 5, which disclaims any warranty as to the speed of their products. For terms to be incorporated into a contract, they must be brought to the other party’s attention before or at the time of contracting (*Olley v Marlborough Court Ltd*, 1949). Olga’s email referred to “standard terms and conditions,” which are accessible on NCC’s website. However, there is no evidence that Mike was directed to review these terms or that they were explicitly agreed upon during their communications. Furthermore, Mike attached his own terms in his email, which Olga did not see due to it being filtered to junk mail. This raises a “battle of the forms” scenario, where conflicting terms compete for inclusion (*Butler Machine Tool Co Ltd v Ex-Cell-O Corporation Ltd*, 1979). Generally, the last set of terms communicated before acceptance prevails, but since Olga was unaware of Mike’s terms, it is unclear whether they were effectively incorporated.
Given that NCC’s terms were not explicitly accepted or reasonably brought to Mike’s attention, Clause 5 may not be binding. Therefore, NCC cannot necessarily rely on this clause to avoid liability for the machine’s slower performance, which handles only 5 cars per hour compared to the market standard of 10. Mike may have a claim for breach of implied terms under the Sale of Goods Act 1979, which requires goods to be of satisfactory quality and fit for purpose (section 14).
Performance Issues and Remedies
Mike’s dissatisfaction with the Deluxe model’s performance raises further legal considerations. As noted, if NCC’s Clause 5 is not incorporated, Mike could argue that the machine does not meet the expected standard of performance, potentially breaching implied terms under the Sale of Goods Act 1979. Case law such as *Bernstein v Pamson Motors (Golders Green) Ltd* (1987) supports that goods must perform in line with reasonable expectations for their purpose. If the machine’s speed significantly hinders Mike’s business, he may be entitled to damages for the loss of profit, though quantifying this loss requires evidence of actual financial impact.
However, Mike must mitigate his losses by taking reasonable steps to reduce the damage (British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd, 1912). For instance, he might explore temporary solutions to increase throughput. Furthermore, any claim for damages would need to account for the agreed price of £40,000, which NCC accepted. If Mike pursues a claim, NCC might counter that the reduced payment already reflects a compromise, though this argument is weakened by their later demand for the full £55,000.
Agreement with Patty: Consideration and Enforceability
Turning to Patty’s claim for £500, the issue centres on whether a binding contract exists for her work. Initially, nothing was said about payment when Patty began assisting Mike with hand-washing cars. A promise to pay made after services are rendered typically lacks consideration, as past performance cannot form the basis of a new contract (*Re McArdle*, 1951). However, exceptions exist where work is performed with an expectation of payment and a subsequent promise formalises this understanding (*Lampleigh v Braithwait*, 1615). Here, Patty’s role over four weeks during a busy period suggests an implicit expectation of remuneration, as it is unlikely she would work for free given the commercial context of Mike’s business.
Therefore, Mike’s promise to pay £500 is likely enforceable, supported by Patty’s prior work. If Mike refuses to pay, Patty could pursue a claim in small claims court, though the cost and effort might deter her. Mike should consider settling this amicably to avoid reputational harm and legal costs.
Conclusion
In advising Mike, several legal principles shape his position. With NCC, the contract appears to bind at £50,000 due to their unilateral mistake, though their acceptance of £40,000 likely constitutes a valid variation. NCC’s attempt to reclaim £55,000 is unlikely to succeed given the agreed settlement. Regarding the machine’s performance, NCC’s Clause 5 may not apply if unincorporated, allowing Mike a potential claim for breach of implied terms under the Sale of Goods Act 1979, though he must mitigate losses. As for Patty, Mike’s promise to pay £500 is likely enforceable due to the implied expectation of payment for her work. Mike should prioritise resolving Patty’s claim promptly and seek legal advice on negotiating with NCC over the machine’s performance or pursuing damages if losses persist. These issues highlight the importance of clear communication and documentation in contractual dealings, underscoring practical implications for small business owners like Mike in managing legal risks.
References
- Adams, A. (2016) Law for Business Students. 9th edn. Pearson Education.
- Beatson, J. (2016) Anson’s Law of Contract. 30th edn. Oxford University Press.
- Peel, E. (2015) Treitel on The Law of Contract. 14th edn. Sweet & Maxwell.
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