A legally enforceable contract should be devoid of inadequacies and legal incompetence. All the legal elements must be present in an agreement that the parties enter into with an intention to be legally bound by the contract. Parties enter into contracts that are bound by law to gain an advantage of being remedied in case the contract fails to materialize (Kröll 42).
Parties also seek to be secured by the law in case of misrepresentation or other unforeseeable issues. In that respect, there are six fundamental requirements of an enforceable contract that, which include an offer and acceptance, mutual agreement, consideration, competent parties, legality, and proper form of contract (Ferrari 21).
This paper will establish the presence or otherwise of each element of the contract as stated above from the fact pattern in the case study of Goodscan and Hospitex contract.
Offer and acceptance
Goodscan is a manufacturing company that has been in negotiations with Hospitex in a bid to sell the 5 x-ray machines to Hospitex. This amounts to an offer made by Goodscan to Hospitex, especially where the company proposes to sell the machines at a quoted price of two hundred thousand Canadian dollars.
A representative from Goodscan travelled to negotiate a deal with Hospitex, an indication of intention to sell or enter into a contract of transaction. On the other hand, Hospitex took part in the discussions to the extent that it proposed its own mechanisms of transaction, such as the law that will bind it and the channel to use in case of a dispute.
It is important to note that to this extent, there is no acceptance by Hospitex and the additional clause or any other aspect of the contract is subject to confirmation by Goodscan. Notwithstanding the agreement by Hospitex to buy the said X-ray machines at a price as quoted, Goodscan is still entitled to disagree on the additional terms of the contract. Nevertheless, it qualifies that there is an offer.
Acceptance in this scenario is by expression and implication of Hospitex to purchase the x-ray machines only if Goodscan accepts to be bound by the convention for contracts for the international sale of goods, as well the clause stating that any dispute arising should be arbitrated using the laws of Ontario.
Nevertheless, it is important to note that Hospitex accepted the offer by implication of engaging in talks and transacting payments for that purpose. This qualifies as a valid acceptance.
Mutual agreement
There are two parties in the scenario, Goodscan and Hospitex, both being companies that have representatives who have conclusively entered into a contract.
The parties have come together to enter into the contract willingly and in their own legitimate and legal capacities for purposes of transacting. In this respect, the parties are not enticed or lured into the contract. Consequently, it is safe to say the agreement between the parties is a mutual one.
Consideration
The Goodscan Company made an offer, including a price for the offer to Hospitex. The two parties negotiated and agreed to a price for the X-ray machines. They further agreed on the mode of payment, which was additional proof of consideration. The said amount was not disputed at the point of entering into the contract, thus it passed as a sufficient consideration for purposes of the contract.
Competent parties
The parties to the contract are two limited companies engaged legally in how they carry their own business. They have a legal capacity to enter into a contract through their assignees, agents, or authorized personalities. This qualifies Goodscan and Hospitex as competent parties to enter into a contract.
Legality of purposes
A contract that is not within the confines of the law is an illegal contract. A contract is determined whether it is legal based on the engagements and the purpose for which the contract is entered. The purposes for entering into the contract must, therefore, be in good in law, legally acceptable, and conducted in a legal manner. The court has the mandate to determine whether a contract is lawful if there is a dispute.
Consequently, the court has the power to enforce a legal contract. In the present scenario, Goodscan and Hospitex are entities that are presumably in business for purposes of what they seek to enter into a contract for. Therefore, the purpose is legal and within the confines of the law.
Proper form
The contract must be in the right and proper format that is indicative of every integral aspect of the contract to prevent a future breach of contract. All the obligations of the parties must be stated or implied. In addition, the prices quoted, dates of payment, and any other necessary information that may be necessary for the parties to be aware of must be stated.
From the fact pattern in the instant case, there is a sequential flow of the format that the contract is being drawn. The contract process moves sequentially to include the offer, acceptance, consideration, mode, and date of payment, mode and form of the transaction, among other implied factors to the contract. Therefore, it is correct to say that the contract is in proper form.
After the two parties entered into the contract, it is observed that the Goodscan suppliers went on strike before it was the 1st of March, the date of supplying the machines. Resultantly, there is a disruption that forces the company to outsource the raw materials, which is among the reasons why there was a contract in the first place as the strike was unforeseeable.
The consequences were unforeseeable as well and the parties can only remedy the situation to facilitate the performance of the obligated party. The additional 10 percent of the cost of procuring the materials to facilitate the contract should be the responsibility of the undertaking party.
Hospitex, however, waived its right by agreeing to meet the costs, mainly because it was under pressure to install the new presses. The additional 100,000 Canadian dollars should not have been paid by Hospitex. Consequently, Hospitex may recover the amount, considering the situation and circumstances.
Upon the completion of payment, the goods were placed on a ship and a bill of lading was received among other necessary documents. There was a transfer of property from Goodscan to Hospitex, thus the ownership was passed.
The bill of lading is an indication that the goods have been placed on the ship in a good condition certified by the captain of the ship. This is a memorandum of acknowledgement that confirms that the goods are received in good order (Ferrari 28). The insurance certificate also confirms that the goods are insured from any risk that may occur on the ship.
The delay in the shipment came after the bill of lading had been signed and the properties passed for shipment. This exempts the Goodscan Company from any mistakes that occurred after the bill of lading had been signed. The responsibility of the shipment of goods was upon the captain or its agents to ensure that the goods arrived in time and in good condition as signed on the bill of lading.
The goods arrived with one of the shipped machines badly damaged, presumably from the boat journey. The state of the goods as verified on shipment and indicated in the bill of lading ought to be the condition that the goods arrive to the owner.
However, it is anticipated that anything may happen during the shipment of the goods. The insurance of the goods before they are shipped is specifically meant to ensure the goods are compensated if a risk occurs during the shipment (Vorobey 137).
In the present case, the goods were passed from Goodscan to Hospitex and the documents, such as the bill of lading and the insurance documents, had been sent to Hospitex. The Goodscan Company was, therefore, free from any responsibility as far as the delay or the state of the goods as they arrived was concerned.
The error in the name of the Goodscan Company that impaired the payment by the bank can be remedied to ensure that the company is paid. Goodscan’s responsibility had been completed upon the shipment of the goods, thus it was entitled to payment as agreed in the contract. Hospitex can also recover from the insurance company in respect of the machine that broke down.
The United Nations Convention on Contracts for International Sale of Goods is beneficial to two parties transacting from different countries in many ways. First, the Convention provides a uniform and fair assessment of a contract (Viscasillas 735). Consequently, it acts as a specific law that governs two parties in two different jurisdictions.
The situation would have been riskier if parties contracted with their own domestic laws applying to the contract of engagement. In case of any dispute, the parties would likely be unfairly adjudicated because of the conflict of laws or the inadequacies in the law.
The CISG, therefore, provides a balance between the interests of the parties entering into a contract. The main disadvantage of the CISG is that parties in different jurisdictions may enter into a contract, but one or more parties may belong to countries that are not signatories to the legislation. This makes it hard to adjudicate upon any issues that may arise during or after the transaction.
Also, the parties may exempt themselves from the provisions of the CISG based on the sovereignty of their state, considering that their laws will apply first before the international law is applied (Kröll 39). This may be detrimental to other transacting parties. The process of seeking redress from international tribunals and courts may also be tedious, expensive, and lengthy.
From the fact pattern in the instant case, both Goodscan and Hospitex are aggrieved in one way or another. Consequently, they are entitled to seek remedies from the international tribunal or any other authority, according to the CISG legislation. Goodscan may seek to compel the bank to pay or Hospitex to correct the name in the credit letter and complete the payment transaction.
Hospitex, on the flip side, may only seek compensation from the insurance company to recover from the damaged machine. Hospitex may also seek to be remedied by the shipping company for the delay occasioned by the shipping company.
Dispute resolution under the CISG can be made through litigation, mediation, or arbitration. The parties can resolve their dispute in their optional preference of the available channels of dispute resolution. This can be made in the International Council for Commercial Arbitration. The decision of the tribunal is final (Kröll 40).
Works Cited
Ferrari, Franco (Ed.). Contracts for the International Sale of Goods: Applicability and Applications of the 1980 United Nations Sales Convention. Leiden: Martinus Nijhoff Publishers, 2012. Print.
Kröll, Stefan. “Selected Problems Concerning the CISG’s Scope of Application.” Journal of Law and Commerce 25 (2006) 39-57. Print.
Viscasillas, Pilar Perales. “Applicable Law, the CISG, and the Future Convention on International Commercial Contracts.” Villanova Law Review 58 (2013): 733-760. Print.
Vorobey, Dmytro V. “CISG and Arbitration Clauses: Issues of Intent and Validity.” Journal of Law & Commerce 31 (2013): 135-161. Print.