Advanced Contract Law and Negotiation
Instructions:-
Only write the 2 questions of the assignment frame as highlighted in yellow:
2.1. Contract type and legal framework
300 words
The contract is a goods and services contract, subject to the provisions of the Goods and Services act 1982 and the Fair contract terms act 1997. [check this]2.2. Equitability of contract
300 words
Review: clause 3.1 and 3.10, one way bet. Cost increases cannot be passed on while cost reductions must be passed on.
Claus 1.2.2 and 4.1.1 contradictions, 4.1.2 also not helpful.
Clauses 4.3, very much one way risk.
Clause 6.1 and 6.3, risk goes back on rejection but title remains with customer.
Clause 7.1.1, “strictly” is very risky.
Clause 9.2, risk for customer limited to 0.
Clause 10, insurance. Seems a bit transferring all risks to the supplier
Clause 11, 11.3, strategic issue for the supplier
Clause 12, no subcontracting while the customer can transfer the contract onward, not good in such risky contract
Clause 13, customer can terminate contract, while supplier is hardly able to do this. [remember the fixed price]
Clause 14.2, third party rights. Too much one way. Waiver of legal rights
Clause 14.2, inability to pledge credit can be problematic because of cash flow. It is common to pledge to the bank in order to obtain credit.
Clause 14.5, rights for customer, only obligations for supplier (not even getting paid seems … )
Solution
Advanced Contract Law and Negotiation
Introduction
In order for any company to remain profitable or generate any form of revenue, it would have to conduct some form of transactions between itself and other entities, including natural persons and other entities. In order to be able to transact these businesses in peace, it is therefore important for the company to sign contracts that would be of significant value or assistance in reaching the objectives of the company and protect the said company from losses due to malicious parties. In this manner, the contract between Healthy PLC and Mediquip Ltd is a necessity to ensure that the companies are able to transact their businesses successfully without any qualms. This paper seeks to look into the clauses of the contract and whether the contract is viable to both parties.
- Type of Contract and Applicability
The above contract that in every right and essence is the basis of transactions between Healthy PLC and Mediquip Ltd. can be termed as a goods and services contract, as provided for under the Goods and Services Act[1]. The essence of the said Contract is to provide a basis for fair play and clarity on obligations between the parties involved in the contract. The contract can also be viewed as a Sale of Goods contract as provided for by law[2] . The said Act provides for contracts that involve the transfer of goods from the seller to the buyer in exchange for consideration, in majority of cases money, which may be refered to as the price[3].
In order for such a contract, or any contract for that matter to be legal and valid, it would require to pass certain checks and balances. First, the contract should have an agreement[4], in this scenario, being the agreement to transfer goods from the buyer to the seller for a price[5]. Secondly, the parties to the contract are expected to have an intention to create a legal relationship between each other. Finally, the contract is expected to have some form of consideration in order to be legal and functional[6].
The contract brought forward is able to meet all of the above criteria in every aspect. The parties are willing to create a legally binding relationship in order to conduct their business transactions in a more legal and organised manner. Furthermore, consideration is provided for in the form of a price that the buyer is expected to pay for the goods provided by the seller[7]. However, an issue of equitability of the contract arises of which may make one party favoured by the contract than another.
- Equitability of the Contract
Several clauses of the contract may disadvantage the parties, in particular Healthy PLC. Clause 3.1 and 3.10 may be considered disadvantageous to Healthy PLC as the increases in costs are not expected to affect the cost of the products while the cost reductions of the products is expected to affect the contract. In this way the contract is favorable to the buyer but is not as favorable for the seller.
In addition to this, the contract has several contracts that may be considered moot as they do not provide any additional help or support to the substance of the contract. In addition to this, there are several clauses, in particular clause 1.2.2 and 4.1.1 that are considered to be contradictory. Harmonization of these clauses would be imperative to ensure that disagreements do not arise due to the conflicting clauses within the contract.
Several of the clauses within the contract may be viewed as risky to the seller. Clause 6.1 provides for the transfer of the goods is to take place at the place of the devlivery, and not at payment of the price. This may create a scenario whereby the seller may fail to pay up for the cgoods as required. Clause 6.3 may also be considered risky to the seller as it is quite ambiguous with regards to the quality of the products and the rejection of the products. Clause 7.1.1 may also be considered as a risky clause with regards to the term, strictly, as it adds a further duty of care on the supply[8].
The Contract is biased against the supplier in many ways, including the fact that Clause 9.2 transfers the risks within the contract to the supplier instead of dividing the risk between the customer and the supplier. The contract under Clause 12 also prevents the supplier to subcontract any section of the contract while the customer has the ability to subcontract. This clause therefore is not favorable to the supplier in any way.
Furthermore, the
contract is also biased against the supplier, in that the Clause 13 provides
the sudtomer with the ability to terminate the contract, while the supplier
does not have any ability to do so. The waiver of legal rights is also present
within the contract but is skewed against the supplier. Clause 14.2 also
prevents the supplier from obtaining credit from other financial institutions,
which may provide a problem if the supplier requires additional cash to be able
to conduct business. In this way the contract is clearly not favorable for the
Supplier.
Bibliography
André & Cie SA v Marine Transocean Ltd, The Splendid Sun [1981] QB 694, [1981] 2 All ER 993, CA
Goods and Services act 1982
Halsbury’s Laws of England/Contract (Volume 22 (2012))/3. Formation Of Contract/(1)
Hannah Blumenthal, The Hannah Blumenthal [1983] 1 AC 854, [1983] 1 All ER 34, HL
Paal Wilson & Co A/S v Partenreederei
Sale of Goods Act 1979
[1] 1982
[2] Sale of Goods Act 1979
[3] Sale of Goods Act 1979 s 2(1)
[4] Halsbury’s Laws of England/Contract (Volume 22 (2012))/3. Formation Of Contract/(1)
[5] Ibid 3
[6] Sale of Goods Act 1979 s 2(6)
[7] Paal Wilson & Co A/S v Partenreederei
Hannah Blumenthal, The Hannah Blumenthal [1983] 1 AC 854, [1983] 1 All ER 34, HL
[8] André & Cie SA v Marine Transocean Ltd, The Splendid Sun [1981] QB 694, [1981] 2 All ER 993, CA