200011 Research Question: Contracts Formed Between Customer & Person - Contract Law Assessment Answers

Research Question:

In the context of at least one example (but no more than two examples) of

services provided in the ‘sharing/access economy’ (such as Airbnb or UberX),

when is a contract formed between the customer and the person providing

such a service?

In answering this research question, your essay must discuss:

• the general contract law principles for offer and acceptance, including for

  online contracts and contracts created via a smartphone app;

• the process and procedures through which the customer and the person

  providing the service interact; and

• when in that process an enforceable contract is formed.

Executive Summary

Contracts can be made either in a written form or through the use of online platforms. The law recognizes contracts that have been made using online platforms. The Uber-Company services make use of a mobile application that is downloaded to the mobile phones of the customers. The contract is deemed to be enforceable once the customer has made the confirmation of the application, requesting the services offered by Uber. For a contract to exist, there should be an offer, acceptance, consideration, and termination. The service provider makes an offer to the customer, who will be required to review the requirements of the contract and accept the offer. Once an offer is accepted, the contract is recognized by law. An offer can only be revoked before the acceptance has been made by a customer.

Introduction

The relationship between the customer and the service provider relates to the contract that is made between them. There is a specific stage when the contract is considered to be valid and in enforcing. Contracts are important because they protect both the buyer and the seller against any misconduct from either of the two. If either party breaches the contract, the affected party can take the other party to a court of law and seek compensation. In the current years, there are various forms a contract that is enforced by the government and courts of law. For example, digital contracts are now acceptable as proof of consent as opposed to the physical contracts that were enforced by the government. Companies are now embracing the use of mobile applications to conduct their operations. This means that the government is now in a position to accept contracts made through these applications. Therefore, they are protected under the court of law.

Operations of UberX

UberX refers to a mobile base application software that provides taxi services to the people across the world. There are certain stages in which a contract is formed between the customer and Uber. The service works when a customer downloads the application on their mobile phones. When in need of the service, the customer opens the application and calls for a taxi and specifies the route to be followed. After entering all the details, the customer then confirms the details. The confirmation will be sent to the next available and the nearest taxi to come to the customer’s location. A court of law recognizes the contract made between the customer and the taxi service. The contract is made through the mobile application and is confirmed. Using the Uber service causes then accepts the confirmation when the customer clicks the confirmation button in the application after entering all the required details.

There are general contract law principles that govern the law of contract. When using this application, a contract is considered to be in force after the customer confirms the taxi request. The service provider has a set of terms and conditions that govern the operations within the application between the customer and the service provider. Terms and Conditions stipulate the guidelines and rules that are to be used when conducting the various operations. The customer is expected to have read the terms and conditions that have been laid out by the service provider, and be in agreement if they want to use the service. By confirming the details and requesting the taxi, the customer also confirms to have read the terms and conditions, and be in agreement with them. For this reason, it is usually advisable that customers are seeking various services to read through the terms and conditions of the service provider. For example, in the case of MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125, the court concluded that issuance of a ticket from the airline constitutes a confirmation of the offer. The airline simply offered to sell a ticket to various destinations. The customer accepted the offer once the ticket was sold and printed.

A breach of contract can occur in various forms. The customer may decide to cancel the service request, even after making the confirmation. A breach of contract may result in various losses or harm to either the service provider or the customer. For this reason, a contract is crucial because it helps in ensuring that both parties are protected from such outcomes. However, there may be cases, whether a breach is inevitable. In such cases, the affected party should ensure that they provide a way out of the contract. This refers to a process by which the contract can be terminated. In such a case, there will be a specified penalty of the party that seeks to terminate the contract. In the case of Uber, every customer is entitled to meet their obligations after making a confirmation. After making the confirmation, the customer assumes all responsibility for the actions he has taken to make the taxi request.

General Law

Under the general law, there is the law of offer and acceptance. A service provider makes an offer to a customer regarding the provision of a service. Under this law, the confirmation of a contract is made once the customer has accepted the offer given by the service provider. The law of acceptance protects the service provider against any loss that may be incurred as a result of the customer breaching the contract. If the offer is not accepted by the customer, then there is no contract that is enforceable. Online contracts are considered to be viable when there exist three key elements. These include an offer, acceptance, and consideration. The concept of an offer is simple to grasp. Web sites offer their goods and services on the internet and visible to anyone who may be interested in the same goods and services. Consideration is used to refer to the factor that something of value is being exchanged between two parties that are involved in the contract. In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) [1953] 1 QB 401, the pharmaceutical society argued that an agreement was made once a customer picked an item from the shelf and placed on the cashier’s counter. However, the court found that a contract is complete when the customer states the products they want and the cashier accepts that offer. Therefore, placing items in a basket by a customer does not constitute to the making of a contract.

Some websites require one to be bound by their terms and conditions just by visiting the website. In other cases, the customer is bound by the terms and conditions only if they make a confirmation to purchase some of the goods and services that are offered on the website. For an offer to be accepted, it must be communicated. Various companies offer varying online platforms that are used to manage these operations. In most cases, online companies often have these services, automated in nature. In the case of automated services, the service provider should be in a position to receive communication from the customer on the basis that the customer has made the confirmation of the order. Some website based companies do not accept the confirmation made by a customer until they have called them to confirm personally the request made by the customer. Once the customer accepts the order request, the company then goes further to begin processing the confirmed order by the customer.

Characteristics of an offer

There are various requirements that help to constitute a contractual agreement. There must be an offer, acceptance, consideration, capacity, intention, legal, and formalities. When all of these factors come into play, a court of law can be in a position to recognize a contract as binding. The offer may be written, oral, or implied. Through these gestures, the customer can be in a position to determine whether an offer has been made or not. The language used in the offer must clear and easily understood by both parties to the contract. For example, in the case of Sands v. Mutual Benefits as well as in Scammell and Nephew Ltd v. Ouston, it was held that words used were too vague and uncertain to amount to an offer. The offer may be conditional or absolute. There are instances when the contract can contain some conditions that must be fulfilled before the offer can be accepted. This is termed as a conditional contract. For example, the Uber - Company requires one to download the mobile application, register an account with them and go through the terms and conditions for that have been laid out by the service provider. An absolute offer is one that does not require the customer to fulfil any requirements before accepting the offer. All that is required is for the customer to accept the offer presented to them by the service provider.

Some details are included in the offer as well. These details give the characteristics of the offer. For example, the offer may contain the duration it is going to be viable and the amount of money that is involved in the offer. An offer may prescribe a time limit after which the offer may be revoked by the person giving out the offer. In the case of Dickinson v. Dodds, the defendant placed an offer to sell the plaintiff a house on Wednesday 10/06/1874. The offer was to remain in force until Friday 12th at 9.00 am. However, the house was sold by the defendant on 11th of June, to a 3rd party. Purportedly, the plaintiff accepted the offer on Friday morning before 9.00 am. It was found that there was no longer an agreement in place because the house had already been sold by the defendant to a 3rd party on June 11th, thereby revoking the offer. All these characteristics are incorporated in the offering statement.

Requirements for an acceptance

An acceptance of an offer may take various forms. It is a manifestation of the customer to agree to the offer that has been made. A contract is regarded to have been made legally when the minds of the parties involved come together. This is referred to as Consensus ad idem (meeting of the minds). There are several rules that are used to govern acceptance. Acceptance can be written, oral, or implied. For example, In the case of Carlill v. Carbolic Smoke Ball Co, acceptance by Mrs. Carlill took the form of her conduct by purchasing and consuming the smoke balls. In Brogden v. Metropolitan Railway Co, it was held that the 1st load of coal that was supplied by Brogden amounted to a form of acceptance of the offer that was presented by the defendant to supply, thereby resulting in an agreement between the parties. It should be clear to the service provider that the customer intends to accept the offer. If there is a timeframe that has been given for the acceptance to be made, the acceptance of the offer should be made within the stipulated period.

As a general rule, silence by the offeree is not considered to amount to an acceptance. For example, in the case of Felthouse v. Bindley, the plaintiff had the intention of buying a house that belonged to a nephew called John, who did not intended to buy a house owned by a nephew named John, who had no objection. The plaintiff had the intention of buying the house at £30 15p. He wrote to John stating that if he did not hear any communication, he would consider the horse to be his at the stated price. John did not give any response. However, he gave the horse to the defendant after six weeks for sale. He also instructed him not to sell that particular horse. Mistakenly, it was sold. The auctioneer was sued by the plaintiff for the damages in conversion. The concern was whether a contract of sale was in place between the plaintiff and John. It was held that the contract was not enforceable because there was no communication from John about acceptance of the offer. The intention to accept an offer should be clearly communicated to the service provider by the offered. A contract can only be revoked before the acceptance is made. The service provider must communicate information about revocation to the customer. However, the customer is not required to giver communication to the company. A customer can simply choose not to take the offer.

Interaction

If negotiations are done through the use of a telephone, the contract is deemed to be complete. In the case of Uber-Company, the contract is complete when the customer confirms to have accepted the offer by Uber. Through this confirmation, the customer is deemed to be in acceptance of the terms and conditions that are presented by the company. Also, the customer will be deemed to be in acceptance of the offer price that has been presented to them. The service provider will receive the confirmation request once it is made by the customer. The service provider is then required to execute their service and provided the services that were offered to the customer. The Uber - Company will be held in breach of contract when they do not fulfil the requirements of the contract.

The interaction between the company and the customers is based on the use of a mobile application that customers are required to download onto their smartphones. Therefore, the interaction between the customer and the company is mainly automated. A customer requests for a pick-up from the desired location and selects the destination or where to be dropped off. The application asks for all personal details belonging to the customer. This is done when opening an account with the company. The company considers a contract to be in force when the customer confirms all the details that are presented in the application and has read all the terms and conditions of the operation. The contract has value embedded in it. For example, depending on the location selected by the customer, the application will calculate and approximate figure that will be charged by the service provider upon meeting the demands of the customer. Once the customer is dropped off at the desired location, they will be obligated to remit the stated amount of money to the driver of the taxi. After this gesture, the duration of the contract will be complete. Before confirming on the application, there a message that informs customers of the terms and conditions of the company. It also informs them that by clicking the confirmation button, they are deemed to have read the terms and conditions statement and that they agree to be bound by them. Despite the fact that the process if mainly automated, the application passes communication to the company informing them of the acceptance message initiated by a customer. From this point forward, the contract is deemed to be in force and can be backed by a court of law.

Conclusion

Contracts come in various forms and have varying requirements. Businesses make offers to the customers in the market, asking them to accept various offers that they are giving them. A contract can either be enforceable or not. A contract becomes enforceable when the customers accept the offer given to them by the service provider. Contracts often have terms and conditions that the offer must adhere to. In this case, the referee should make a point of going through the terms and conditions of the contract in a thorough manner. Knowledge of a contract is crucial to the parties required to accept an offer. Any party that does not complete their obligations of the contract within the stipulated time is deemed to be in breach of contract, and can be penalized for their actions. Termination of a contract can be done anytime before an acceptance or confirmation is made. However, contracts have the provision of termination. Termination of a contract should be done within the requirements of the termination of the contract.