Widespread use of e-mails and the internet has placed new importance on the principles of contract formation. There are five elements which must be present in order for a contract to be legally binding:
- Intention to create legal relations
A contract may be formed orally, in writing, or partly orally and partly in writing. Disputes often arise when the contract terms are not set out in writing as it is unclear what terms were agreed and incorporated into the contract. A contract may also be implied by conduct.
Disputes can also arise as a result of a “battle of the forms”. This occurs during the negotiation of agreements when each party wants its own standard terms and conditions to be incorporated into the contract. Battle of the forms disputes are notoriously difficult because ascertaining the terms of the contract the parties appear to have agreed is a matter of construction and fact. Often the last set of terms dispatched before acceptance or performance (the last shot fired in the battle of the forms) will prevail.
In broad terms if contract terms are breached the remedy is damages to put the claimant in the same position as if the contract had been performed. In order to succeed in a claim for damages for breach of contract the claimant must prove that the defendant breached the terms of the contract, the breach caused the loss and that the claimant has not unreasonably failed to mitigate that loss.
In light of the global market in which the world now operates consideration also needs to be given to jurisdiction.
Businesses should regularly revisit their terms and conditions to ensure that they provide as much protection as possible. Consumer law was consolidated by the Consumer Rights Act which came into force on 1 October 2015. Significant changes include the following:
- Under the Act, the trader will be responsible for the cost of the consumer returning rejected goods
- The requirements in relation to how refunds are paid will also apply where the consumer only rejects some of the goods
- An exemption, which allows a deduction to the refund to take into account the use of the goods during the first six months, will only apply to motor vehicles
Businesses will need to focus on the key changes that they need to make to their terms and conditions, and sales processes. There is also guidance which focuses on the “grey list” of terms which may be unfair with extensive sections on the “fairness” test and core exemptions that take account of recent case law.
The TSP Dispute Resolution team have extensive experience in this area. Contact them here.