Reference no: EM133192002

Question 1. AB Chic offers home furnishings on its website. The order form includes Terms and Conditions about the item, billing and shipping information, and an additional box for the customer to type in "Comments". The order form states that delivery will be made via bonded courier to the address of the purchaser within 21 days of the placement of the order. In the Terms and Conditions, there is a section called "Shipping" which states that AB Chic shall not be responsible for any damage or loss to products that occurs during shipping and handling.

On October 1st, Connie Customer placed an order for Monogrammed towels that she is planning to give as a wedding gift. In the comment area she types, "I only want these towels if they can be delivered by October 14"
Connie clicks on a box indicating that she has agreed to all of the terms and conditions related to orders placed on the company website. She submits payment via the secure transaction site, and places the order.

a. Do the parties have a legally enforceable contract? Why or why not?
b. Assuming a contract has been formed, will Connie have a right to sue if the towels are delivered on the 20th day following the placement of the order? Explain your answer.
c. The towels are delivered on October 13th by Canada Post. The packaging is ripped and the towels are irreparably stained. Evidence shows that the staining occurred during shipping and were not the fault of AB Chic. What, if any, remedy does Connie have in this situation?

a) A complete answer will evaluate whether or not there is a contract between the parties by reviewing the essential elements of a contract.....is there a meeting of the minds, is the offer and acceptance, and is there consideration flowing between the parties. Before we ask whether or not Connie's comments regarding delivery time amount to a counter offer, it should be clear that there is not a meeting of the minds on the essential elements of the contract because time is always vital in any contract. It should also be noted that this would be a unilateral contract, that comes into existence when performance is completed in accordance with the specifications of the offer (Carlill v Carbolic Smoke Ball)
But this is not the end of the issue because Connie has effectively made a counter offer. Your answer should identify that a counter offer effectively terminates an offer. Has the counter offer been effectively communicated? If it has, then AB Chic is bound to deliver in accordance with the revised delivery date. If it has not, then there is no contract. How do we ascertain whether the Counter Offer was properly delivered? Remember the case of Lyoto and Fabiola? We need to make mention of Electronic commerce, and of standard form agreements. If AB Chic has utilized an electronic communication system capable of receiving communications, then AB Chic has effective notice of the counter offer and must clearly and unequivocally indicate its acceptance. Silence is not acceptance. A complete answer should question this aspect in assessing whether or not a contract was formed on terms stipulated in Connie's counter offer. It should also be noted that Connie was clear she would only accept if delivery could be made by the 14th, and so the offer is terminated and her subsequent payment is of no consequence.

b) If we assume a contract had been formed, we can only answer this question if we know on which terms the contract had been formed. The time of delivery is ambiguous, so we can follow the Parol Evidence Rule to admit additional evidence to settle the ambiguity. This evidence will disclose one of two things....that the contract was formed on terms established by AB Chic, or that it was formed on terms established by Connie. We could assess what is reasonable in the circumstances....ie....what would the reasonable person in similar circumstances assume in relation to the contract. The additional evidence would be similar to the factors discussed in answer A above. You may also argue that AB Chic had a duty to notify Connie that her counter offer was rejected because they controlled the information system and were in receipt of her payment. This would earn points, although it would be technically incorrect.
c) While on its face it would appear that AB Chic can avoid liability to Connie by virtue of the exclusion clause in the Terms and Conditions, we have to ask whether the clause was effective. Did AB Chic do enough to bring the clause to the attention of customers, such that a reasonable person would believe that the party had clear notice of the provision? Reference Tilden v Clendenning.....It is not enough to say that they are not responsible because the damage occurred during shipping. Evidence may disclose that their packaging was inadequate. To be certain, we need to ascertain whether they can rely on the exclusion clause.
IF you said that Connie can sue the shipping company then you may be technically correct but not in terms of our course material to date. Connie has no contract with the shipper. There is not privity of contract and so she has no right of recovery against the shipper in contract law. She may have a tort remedy but we have not covered that yet. Take note of the ongoing obligations of AB Chic in relation to the concept of Vicarious Performance (pg 203 text)

Question 2. News-on-the-Net is an online news service that sends email summaries of news stories to subscribers. In order to subscribe, a person must view the News-on-the-Net web page, click on subscription and enter their personal details. The service charges a small monthly fee, but it is mostly paid for by third party advertisers. At the bottom of the web page, there is a link to a page entitled Terms of Use. There is a also a space to indicate that the subscriber has read and agreed to the Terms of Use, although it is not actually necessary to link to the Terms of Use.
The Terms of Use is a 20 page document that contains numerous terms regarding copyright matters, cancellation procedures, a privacy policy and more. Also included is an exclusion clause that states that the subscribers can not hold News-on-the-Net liable for any possible damages that the site may cause to the subscriber. The exclusion clause was in bold red font.
When Scott subscribed, he did link to and review the terms in some detail, including some that were in a bold font, but he did not read the exclusion clause.
Due to a problem with their virus detection software, News-on-the-Net sent a computer virus to all of its subscribers that reviewed a particular news article. The virus disabled Scott's computer and caused him to miss an important contract deadline, for which he paid a penalty.
Scott sues News-on-the-Net for recovery of his loss. News-on-the-Net relies on the exclusion clause to excuse themselves from liability.

a) Who will be successful and briefly explain why.
b) Would your answer be different if the virus originated from one of the advertisers on the News-on-the-Net feed?
c) Finally, what if it was revealed that News-on-the-Net had been aware for several months before they offered their news service that they had a problem with their virus detection software?

a) At the outset, you must undertake an analysis of whether or not there is a contract between Scott and News. Has there ben a meeting of the minds? Is there Offer and Acceptance? Is there consideration flowing between the parties? While this may seem apparent, we should never assume. Remember that Electronic contracts are different in terms of how they are formed. We have a click wrap agreement that stipulates all of the Terms and Conditions, so we have to assess whether there was a problem in formation of the contract. In the facts it is apparent that the essential elements did in fact exist, and as such a proper conclusion is that the contract was formed.

Having determined that a contract exists, you must decide who you feel would be successful. I will accept either party as long as you are able to support your position.

If you feel that News is successful, then you must state that they were able to rely on the exclusion clause. Scott did click on the Terms and while he read some he did not read the exclusion clause. Would a reasonable person have noticed the clause? Did News provide sufficient notice (Bold Red Font) of the exclusion? Does the fact that Scott did not read it change anything in light of the law on exclusion clauses?

If Scott is successful then you must argue that News did not do enough to bring the exclusion clause to the notice of its customers. The notice was buried in 20 pages. It was not actually necessary to link to the Terms and Conditions. Does the fact that Scott did link change whether a reasonable person in similar circumstances would have had notice?

b) While you may be inclined to suggest that News should not be accountable (liable) for a problem that originated with its advertisers, the fact remains that News is responsible for content that it provides via its subscription service. While the doctrine of Privity precludes Scott from suing the advertisers in contract, the notion of Vicarious Performance tells us that News is ultimately accountable to its subscribers.
You may note that if Scott were to sue News, that News has a contract with the advertisers and would likely be able to recover from the advertisers.

c) This raises issues with the formation of the contract. News makes (or fails to make) statements about existing facts during the formation of the contract. Subscribers rely on these statements (or omissions) and enter into the contract. This is a misrepresentation. We have to assess the nature of the misrepresentation in order to determine how it affects the contract. A misrepresentation can be one of innocent, negligent or fraudulent. Since News knew of the problem, they have made a fraudulent misrepresentation (false statement or misleading silence made without honest belief in its truth, made with intent to induce contract). A fraudulent misrepresentation gives rise to a right to rescind the contract and seek damages.