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Edexcel BTEC HND Diploma in Business (Management)
Unit Number & Unit Title
Unit 5 & Aspects of Contract and Negligence for Business
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Signature: George Chibuenyi Date: 29/07/2014
East Midlands Airways Airbus
The advertisement by East Midlands Airways on the aviation industry trade journal for the sale of Airbus 321 for £10.4m is an invitation to treat. Phil is aware of it and so responded Chief Executive Officer to Managing Director (both with the right capacity to act on behalf of their organizations).
Phil’s phone call to Joseph with intention to talk concrete business should Joseph accept backed with an offer of £100,000 (consideration) to delay action on the sale of the Airbus (forbearance on the part of Joseph).
In this case, there is an agreement arising from the meeting of the minds (consensus ad idem). Apart from agreement and consideration, intention to create legal relations is implied. Rose and Frank Co. v Cromptom (JR) & Brothers Ltd (1925), the court held that there was no intention to create legal relations when the agreement was made and so, was not enforceable.
Phil’s asking if Joseph will defer sale of the Airbus until he returns from a five-day business trip is an offer to Joseph, and Joseph accepted when Phil placed a £100,000 consideration on his offer.
There is Offer – (Carlil v Carbolic Smoke Ball Co 1893) which Phil communicated to Joseph in their phone conversation.
There is acceptance by Joseph of Phil’s offer duly communicated in their phone conversation. Joseph accepted Phil’s offer to keep the Airbus until 5 days when Phil must have returned from his business trip to view the Airbus. Mountford v Scott (1975). The purchaser of a house paid the seller £1 for an option to buy, exercisable within six months. The Court of Appeal held that the seller could not withdraw the offer before the option expired.
There is consideration which Phil made to back his offer and keep the option to view the Airbus open under a legally binding contract. Consideration is one of the essentials of a valid contract. It is an executor consideration under mutual promise to perform a legal obligation in the future. It is a promise made by Phil to Joseph for another promise.
In the first instance this is a contract for the sale of goods between Key Services Enterprise (KSE) Ltd and Unique Mobile Solutions Ltd. It is also a Business to Business negotiated type of contract.
Key Services Enterprise (KSE) Ltd has given Unique Mobile Solutions Ltd prescription of type of mobile phones they need.
Observation 1 is that the use of the mobile supplied was illegal in the UK.
Here is a void contract because the mobile phones supplied cannot be used in the UK as being illegal or against public policy.
Observation 2, the supplied telephones requiring some tuning to particular frequencies is contrary to Sale of Goods Act 1979 S.14 (3) which states the implied condition that goods supplied will be fit for their purpose. Reference Stevenson v Rogers (1999)
“Defendant Fisherman sold and old fishing boat which was not of satisfactory