Brief statement of facts
In the question, Elena, a woman in her mid-sixties with a problem in speaking English is confronted by John, a salesman from Incredible Irons Ltd, a company that sells steam irons. John imposes himself on Elena by insisting that his irons come at very low prices and that payment could be made by installments.
While Elena clearly showed that she did not understand the offer being made, John took advantage of her poor English and the fact that she was timid by prevailing on her that all she had to do was sign a standard form and he would fill the rest of the form. She did this without even reading the terms of the contract which indicated that she could only get a refund of 40% of the purchase price if the iron had problems and also that she would pay a penalty equivalent to an installment if she defaulted.
Elena is now seeking advice on whether the contract could be avoided after learning that the product was available cheaply and that they had no extra money to pay the installments.
Analysis of scenarios
Several issues arise for consideration before Elena can be advised. First, there is the question of whether the requirements for a valid contract were satisfied namely; offer and acceptance, capacity to contract, sufficient consideration, intention to enter into a legally binding agreement and legality of contractual objects.
This means that we have to first look at; whether Elena had capacity to enter into a contract with John, whether she accepted John’s offer to sell the steam iron to her, whether there was sufficient consideration given for the steam iron, whether Elena intended to be legally bound into contract and finally whether the objects of the contract were legal.
Secondly, we look at the legality of John’s act of filling the form on Elena’s behalf without explaining the terms of the contract to her. By terms of contract we are referring to issues like price, mode of payment, duration of payment, penalties for default of payment etcetera. Thirdly, we look at the issue of whether Elena freely agreed to buy the steam iron or whether she was unduly influenced. Fourthly, we look at the legality of the contractual terms such as the 40% refund under consumer law.
Fifthly, we look at the legality of John’s act of asking for Elena’s personal information and purporting to use it to fill the form. Next, we have to consider whether the price difference between John’s offer and the price in departmental stores amounted to a fraudulent misrepresentation or negligent misstatement by John. Does the principle of caveat emptor ‘buyer beware’ apply here since Elena did not take due care to learn about the steam iron. Lastly we consider whether Elena’s contract with Incredible Irons Ltd. was void, voidable or illegal.
Analysis of the legal issues arising
On the issue of essential requirements for a valid contract, I find that Elena had capacity to enter into a contract since she met the required age threshold and she was sane. I also find that there was offer and acceptance since eventually Elena consented to sign the forms knowing well she was signing a contract for purchase of a steam iron.
This means that there was consensus ad idem (a meeting of the minds) which is an essential requirement for validity as established in the case of Smith v. Hughes (1870). Lastly, there is sufficient consideration, an intention to enter into a legally binding agreement and also the contract was not illegal. This means that the contract was both formally and essentially valid.
Since I have established that a valid contract does exist, the next available option is that the contract is voidable on certain technicalities. I first look into the act by John to fill the form on behalf of Elena and have her sign it. In the US, the statute governing contracts for sale of goods such as this one is the Uniform Commercial Code (UCC). Article 2 of the code provides that in all contracts, there is an implied mandatory rule that contracts shall be made in good faith.
The issue thus is whether John acted in good faith. Judging from the fact that he knew that Elena had problems reading and understanding the contract but still did not explain the terms of the contract in full, John did not act in good faith and thus this contract is voidable on that ground alone.
Undue influence occurs where a person in a position of power uses his power to take advantage of another person’s weakness and vulnerability. In this case, John insists on entering the house and also prevails on Elena to sign a contract whose terms she cannot clearly understand. Since John realized that she was timid and that she did not understand English but still insisted that she sign, there is a clear case of pressure. However, undue influence requires that there be a significant relationship between the two parties where clearly one exerts his authority/power to induce the contract (McKendrick 2010).
There is no such relationship between John and Elena and thus there is no undue influence. Additionally, there is no duress since there was no physical or economic threat of harm as established in Barton vs. Armstrong (1976). Elena’s consent to the contract was thus genuinely obtained under common law. However, some states have passed legislation against such kinds of ‘high pressure door-to-door sales’.
I then look at the issue of consumer protection and whether the laws here provide Elena with a remedy. In US consumer law, the clause on a refund of 40% is void. This is because the law provides for the return of faulty goods upon which the good should be replaced or the money should be fully refunded as long as it is within reasonable time.
Another issue arising is that of caveat emptor. The principle states that the buyer should take caution and ensure that goods they buy are of the right description and fit for their use. Under common law, Elena would have no remedy against John had the steam iron been faulty however, this does not apply in this case since she is protected under consumer law. The fact that John claimed that the price for the steam iron was ‘a special low price’ which was an untruth, Elena has a remedy against John for misrepresentation.
Advise
Based on the fact that John asked for Elena’s personal information and filled the contract form himself without explaining terms of the contract to her, Elena can avoid the contract.
The contract is also voidable due to John’s fraudulent misrepresentation on the price. Another piece of advice I would give Elena is that the clauses on 40% refund and a heavy penalty are unenforceable in law but they do not make contracts void or voidable since they are not the main contractual terms. Elena’s remedy in contract law is rescission and if John was to sue her for breach, he would not succeed.
References
Adams v Lindsell, (1818) B & Ald 681.
Barton vs. Armstrong, (1976) AC 104.
Bower, S. (2004) The Law relating to Estoppel by Representation, 4th edition. London: LexisNexis.
Harvey v. Facey, (1893) A.C. 552.
McKendrick, E. (2010) Contract Law: Text, Cases and Materials. Oxford: OUP.
Robophone Facilities Ltd v. Blank, [1966] 3 All E.R. 128.
Smith v. Hughes, (1870) LR 6 QB 597.
Uniform Commercial Code (UCC), Section 2-207(1).