Commercial Law Assignment

Part A

There is a clear contract between Mikrochip Ltd and Alphatel Ltd, as there has been an offer made, acceptance, consideration given and the intention to contract between the two parties.

Firstly, for a contract to exist there must be an offer. An offer is when one party indicates to another, their desire to enter into an agreement which is binding on certain terms (Sweeny, O’Reilly, Coleman., 2010). On February 2, Mikrochip responded with an email stating that Alphatel’s offer had been accepted on the ‘usual terms and conditions’. This was not the acceptance, rather a counter offer as new terms and conditions were being added to the contract. It was on February 3, 2011 where acceptance took place by Alphatel. Alphatel received the goods therefore accepting on the usual terms and conditions which Mikrochip had set, thus forming the contract on this day.

In the case Masters v Cameron, the judges established that in order to accept an offer, it must be final and unqualified. In this case, an agreement was made subject to contract which therefore was not binding (Sweeny et al., 2010). In the case of Mikrochip and Alphatel, the first acceptance was unqualified, as although they had stated that they had accepted, there was still going to be more terms added to the contact. Therefore, the acceptance took place when Alphatel received the goods.

In order to determine whether there was an intention to contract, the courts use ‘the reasonable person test’. This considers whether a reasonable person would believe that the agreement between the two parties is binding in the court of law (Sweeny et al., 2010). In this instance, Mikrochip and Alphatel’s agreement would be seen as an intention to contract because any reasonable person would take the exchange of assumingly a substantial amount of money, in return for Mikrochip’s products, as being a binding contract.

Lastly, for the contract to be formed, consideration must be given. Consideration is something of value that is exchanged between the two parties which does not have to be of equal status (Sweeny et al., 2010). In this case, consideration lies in the form of the X-Chips from Mikrochip in exchange for payment of money from Alphatel.

After Alphatel sent their order, Mikrochip made reference to its usual terms and conditions that are displayed on their website. There is a statement on the website and Alphatel may be unsure whether it is a term of the contract.  To determine if it is or not, there are four rules that are to be used. The statement they are referring to is an exemption clause. This means that it is included in the contract in an attempt to limit or exclude liability for certain breaches of contract (Sweeny et al., 2010).

The test to see if an exemption clause is a term of the contract is the same as for any statement and is determined by four rules. Only one of these four rules applies in this situation, and that is when the statement is in writing but unsigned, it is questioned whether the person trying to incorporate the term has given reasonable notice as to its existence (Sweeny et al, 2010).

Reasonable notice is a question of fact and therefore it is necessary to look at all the details. The case Parker v South Eastern Railway Co (1877) established that the clause can only be a term if the seller has taken reasonable steps to bring the existence of the clause to the attention of the other party before, or at the time of making the contract. This case also recognised that if acceptable notice has been given, it doesn’t actually matter whether the party read the clause or not.