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The assignmet provides analyse and explain the elements required for the formation of a
contract in the motor industry, different types of contract and terms in contracts beweent
European supplier and World Auto company. Therefore client and supervisor can see the
effect of them in contract.
1.1 The importance of the elements in a valid contract
1.1.1 Agreement
The first element in valid contract is agreement. Agreement is nothing but binding two
parties together
From the case that the world auto company have agreement with suppliers and
customers. World Auto Company imports parts from European suppliers and then delivers
parts to customers.
Offer is nothing but ordering goods or asking other to buy goods . For example, World
Auto Co offer European supplier to import 500 rubber tyres and 500 wheel rims to
Vietnam, then supplier agree to supply those parts (case study,2014).
Acceptance is nothing but accepting the order from offerer. Offer and acceptance bring
parties together. For instance, World Auto Company offers the customer to buy their car's
parts then the customer accepts to buy the parts. Accepting to be seviced is acceptance.
1.1.2 Consideration
Consideration is each party imvolvement in contract. When WAC sell auto'parts to
customer and provide sevice, if customer accepting the parts from WAC. On behalf,
customer each pays, so both consider to each other. money for this sevice To be specific,
World Auto Company promises European suppliers 700000 pounds for a promise from
European suppliers to import car's parts to Vietnam. 700000 pounds would be the
consideration for promise, and European suppliers' effort would also be consideration
(case study,2014). Another case is that a customer sends a mail to world auto company to
order a message with detail of lowest cash price of four BMW rubber tyres . World auto
company sends message in reply ''Lowest price for four BMW rubber tyres, totally 1500$.
This customer accepts the price and wishes to contract, but world auto company gives the
customer no anwser back. Decision is that a respond of world auto company was a
statement of his lowest price to the customer. Just only the customer accept the price to
contract with world auto company so this report will not be considered to be an offer.
Consequently there no contract has been made (business law, 2014). In addition, when
the customer sign the receipt of goods, if there is any damages arising from original errors,
the European suppliers must pay for these errors. If damages happening because of
transportation, World Auto Company would pay for them (case study,2014).
1.1.3 Intention to create legal relation
It is essential to have intention to create legal relation in a valid contract. An agreement
will only become a legally binding contract if the parties intend this to be so. This will be
strongly presumed in the case of business agreement but presumed otherwise if the
agreement is of a friendly, social or domestic nature (business law). European supplier
agrees to supply some parts to WAC, they intend to create legal relationship. For example,
supplier agrees for term of suppling parts for one year. And then supplier supplies those
part for one year. WAC reorder for the next term then supplier is bound to supply. If
supplier tell that not supply parts second time, then WAC can sue against supplier. When
the first transaction happens, they intend to create legal relations (case study,2014). In
another case, the sales manager of World Auto Company promises to help a stunning
famale customer to purchase the cheapest parts of Lexus. A week later, the sales manager

breaks his words to this cumtomer. This promise does not create any legal relations or
gets into legally enforceable contract. This customer, therefore, can not sue against the
sales manager (case study,2014) if supplier agree to supply some parts to WAC, they
intend to create legal relationship.

1.2 The impact of different types of contract

1.2.1Verbal contract
Verbal contractis a contract, the terms of which have been agreed by spoken
communication. In verbal contract the parties involved did not have any evidence to show
that there was a contract between the two parties.
parties. Therefore, there is no clear evidence for
parties sue against each other when they come to the court. For example,there are only
7000 pounds parts in World Auto's store. Jame, a World Auto's customer, offer to buy
these parts. World Auto Co accept to sell the auto parts which cost 7000 pounds in a
handshake deal. David who is also a customer makes a higher offer, and these auto parts
was sold to David. Jame sued against World Auto Company for beach of oral contract.
Consequently the conviction was quashed due to non of the existed evidence to show that
there was a contract between them (case study,2014). . In order for a verbal agreement to
be legally binding, the agreement must be completed. This means that all terms and
conditions have been reached and agreed about services and terms of pay. An oral
contract is as good as the paper it's written on (Samuel Goldwyn, 1974).
1.2.2Written contract
Written contract is a printed document that both parties come to agreement about all
terms and condition with their signature.In oder for the validity of written contracts to be
ensured, they should be approved by an attorney. All parties must fully be aware of their
responsibilities involed. The written contract protects both parties from breaching
contract.The written contract is generally used as evidence of an agreement. World Auto
company should have a contract written up for each client or customer to sign. This
ensures that payment will be made for all transaction completed, especially allows World
Auto company to take legal action in the case of nonpayment.
1.2.3 Distance sales contracts
Distance sales contracts is a kind of contract that you do not have the opportunity to
see or touch the goods before purchasing. The buyer also can not see the face of client.
However, it is more convinient for cumtomer to buy goods by distance sales contract such
as easy to gain imformation, simple to pay, comfortable to cancel the contract.For
example, a World Auto's customer agrees to buy 4 car wheel auto parts by a distance
sales contract made over the internet. Before signing the contract, World Auto Company
must give imformation to the customer such as price: 800 pounds including 16 pounds
VAT, delivery: 25 days working after deposit confirmed, payment: letter of credit or
telegraphic transfer, main feature: 12-26inch car alloy wheel, high strengths and strictly
inspected, the cost of communication: 0.5 pound. After concluding the contract, World Auto
Company is going to send a written confirmation to this customer by email. If this customer
wishes to withraw from the contract without any penalties or giving any reason, he will
have at least 7 working days to do it. Thereafter, World Auto company is going to give
money back to the customer within 30 days. Especially if the customer paid by credit card,

World Auto company must stop the contract immediately (case study, 2014).
4 Export/ Import mode of contract
An export or import contract is essentially an agreement between World Auto Co and
European supplier. Export/ import mode of contract to export or import goods to other
contry to serve domestic consumption, or serving the manufacturing sector. When
European suppliers tends to import auto part to Vietnam, they have to provide imformation
about their parts such as product
roduct name, quantities, Inspection, total value, terms of
delivery, taxes, duties, charges, period of delivery, part-shipment, trans-shipment,
consolidation of cargo, packing detail, terms of payment, discount, commission, licenses,
permits, insurance, arbitration, signature of the suppliers.

1.3 Analyse terms in contracts with reference to their meaning and effect in the
motor industry
1.3.1 Condition of contract
Before taking part in a contract, various condition will often be made by one party in
order to encourage or induce the other party to enter into the contract. Conditions go to the
root of the contract. If a condition is breached, the innocent party is entitled to terminate
the contract and claim damages (business law, 2014). Breach of conditions is the main
reason that terminate the contract. In order for a contract to be terminated, the breach
must be shown to effect the very root of the contract. In the motor industry, for example,
when client accept to buy auto's part engine, Would Auto Company will ensure that no
damage is caused to any auto's parts of the client when these parts are used. World Auto
will not ask for the cost of repair of any damage caused to the clients parts during the
period of insurance. In term of client's condition, the Client shall not be liable for any
damage caused except for damage directly arising from acts of God or accident. The
continuous use of car causes the engine becomes overheat. As a result, the engine is
broken. World Auto company denies to warrantee the engine and states this broken arising
from acts of God. The fact, this engine is broken due to abuse, which is not mentioned in
condition. The client then can sue against World Auto for breach of condition as and claim
for damages (case study, 2014).
1.3.2 Warranty of contract
Warranty is a less important term of a contract. It does not go to the root of the contract,
but is subsidiary to the main purpose of the agreement (business law). The amount of
damages for which a company is liable primarily in breach of warranty cases relates to the
difference in value between the item the buyer thought he was receiving and the item he
actually received (Uniform Commercial Code). A warranty is a contractual assurance and it
may be implicit or explicit. For example, an explicit warranty for a rubby tyre may
specifically state that it will last for at least 6 years. An implicit warranty is that the car
wheel is able to stand friction.
an warranty for a rubby tyre may specifically state that it will last for at least 6 years.
Actually after 3 months from the day of purchase, this rubby tyreAn implicit warranty is that
the car wheel is able to stand friction. Warranties provide the clients of World Auto
company with protection including quality and performance of products. Consequently
breach of warranty can not lead to beach of contract, but perhaps the injured party claims

for damages.
1.3.3 Innominate term
Innominate term is neither condition nor warranty. Therefore, it is clear that can not fallow
the rules for innominate term. For example, European Supplier delivers parts to World
Auto Co two days late due to acccident during transportation. If consequence cause
serious damage to World Auto Co such as losing the whole of the benefit of the contract,
the court will decide to give World Auto Co the right to terminate the contract. If not, World
Auto Co will be entitled to damages only. But World Auto Co have the right to claim for
damages (case study,2014). The way to cure for breach of an innominate term bases on
the nature of the breach. Another example is that ????
1.3.4 Implied term
Implied term is a part of the contract but not expressly mentioned. Some such term may
be implied by the courts as necessary to give effect to presumed intentions of the parties
(business law). Implied terms of a contract may be legally put in by custom, statue or the
courts in order to bring usefullness and efficacy to the contract. Hutton and Warren Act
1863, decision is that the tenant had a legal right to continue to farm the land until the end
of tenancy and gained a allowance for seeds and labour incurred, which is implied term by
custom. Term may be implied by statue, the Sale of Goods Act 1979 had a decision to
provide four important protection for buyers and put these terms into all contract for the
sale of good whatever the paries themselves have agreed in the terms and conditions of
sale. Similarly in motor industry, no matter what the client and World Auto company have
come to agreement in term of contract, there are four mainn protection. The first one is
that the seller, World Auto Company, must have the right to sell auto's parts. The second
one is parts sold by description must correspond to the description. The third is parts must
be of satisfactory quality. The foutth is parts must be of satisfactory quality. Last but not
least, parts sold by sample, the good must correspond to the sample in quality. Moreover,
the effect of these implied protection is that the contract between dealer and buyer would
be a contract to transfer ownership of goods and the goods are exchange for money.

1.3.5 Express terms are terms that have been specifically mentioned, expressively agreed
by both parties at the time the contract is made. Therefore, the court will look first at these
terms in examining a contract. Express terms can either be oral or in writing. In most
contract the primary obligations of the parties include express terms.
1.3.6 Exclusion clause
Exclusion clause is a term in a contract which intends to exclude one of the parties from
liability or limit the person's liability to specific listed conditions, circumstances, or
situations. It can be inserted into a contract which aims to exclude or limit one's liability for
breach of contract or negligence. For example, World Auto Company sell parts to client
and have a small information sticked to part stating that World Auto Co will not have duty
to repair damaged part if it get burn. World Auto Company limit the their liability.
2.1.1: Agreement: Offer:
In case 1 World Car Parts Customer Service offers to sell XYZ parts, followed by some
terms and conditions such as the warranty does not cover broken parts due to wrong

supply voltage and improper installation of the Skoda - VW Oil Pump. In case 2 a
employer offer to invite a employee to work at World Auto Company, as a Regional
Business Manager within Accouting department for the employee. Acceptance:
In case 1 World Car Parts sends a warranty certificate to the customer. Then the customer
accepts to buy XYZ products from Skoda-vw Oil Pump or World Car Parts. Accepting to
buy auto parts is acceptance. In case 2 the employee accepts some conditions from
wirrent contract of the employer such as starting salary of 1000 pound per month.
Therefore, accepting conditions is accetance.
such as being a full-time employee, starting salary of $100, being paid on a bi-weekly
basis and on the 15th day of the following month, being given a business vehicle allowance
reimbursement in the amount of $20 per month. The employee will be entitled to 15
vacation days, 10 sick days and 2 personal leave days perannum.
2.1.2: Consideration:
In case 1 World Car Parts will set warranty of defective products. When client buy auto
parts, those part will be under warranty because both of them are involed in contract. In
case 2 World Auto Company believe that the employee will be a fine addition to their
Marketing team in return the employee will be a full-time employee and paid on a biweekly basis as well as commissions will be paid on the 15 th day of the following month.

2.1.3 Intention to create legal relation:

In case 1 the
the customer accepted to buy XYZ products from World Car Parts and they
received a warranty certificate which create a legally binding
2.2 Analyse the law of terms in the above two different contracts
2.2.1 Condition
Case1: Term and condition always is made before contract is signed. Condition set up
obligation of parties that involed in contract. For instance, if client's part is under warranty
of WAC getting broken due to wrong power supply voltage and act of God, this part will not
be warranted. Because the part is damaged by those accident, which is one of the
condition in contract that warranty will not cover those damag
Case2: Employee and employer will be legally bound each other if they agree the
conditions and sign the written contract. For instance, employee has to work 8 hours a day
for company and company will pay 25 pounds for this. Working 8 hours a day is condition,
similarly paying 25 pounds. If employee is absent a month without imforming then

employer can terminate the contract. Because absence a month without informing is
breach of condition.
2.2.2 Warranty
Case1: Warranty is a minor thing of contract. sirial number is minor thing of warranty.
Whatever siri of product, name and information of product, when parts warrated without
insurance card, WCP can find in systerm whether client's product is warranted nor not. If
sirial number of a part is not altered intentionally, but invisible because of scratching, in
those case manufacter delays replace or repay, but they can not terminate the contract.
They will make investigation and take a lot of time to identify this part. By the other way,
they will tell the siri number is unvisible so client must pay for sevice and absolutely not
terminate the contract.
Case2: the employee has five days left and take more ten days sick, employee inform to
employer that he is sick or takes agent work so he takes extra 10 days. Then the employer
will not terminate the contract
2.2.3 Innominate term
Case1: The client buy part XYZ from WAC so those parts are under warranty of WAC. If
those parts is warranted by other auto company, they will not be cover the payment of
repair and change. Another example is that the client hire-purchases a engine and pays for
6 months. But at the end of fourth month, the car was stolen. The client still has to pay
money for WAC.
Case2:Another example is that employee is working as secrectory for HAGL company.
The employee chats with a friend which is director of Minh Toan company that is in
competition with HAGL company. The employee accidentally leak the confidential
imformation of HAGL company. Therefore Minh Toan company gains more profit than
2.2.4 Exclusion clause
Case1: Exclusion clause intends to limit one of the parties from liability to a specific
circumtance. For example, client get an ensurance certificate that cover client's auto parts
2 years from the date of purchase from World Car Parts. After 2 year, the client has to pay
for repairing and changing those parts. World Car Part inserts a condition into a contract
which aims to limit their liability
Case2: The employee get a health warranty form company. The health warranty covers
the employee's health and his family. If employee's father suffer from influenza, this health
warranty has no liabilities to cover that illness.
2.3 Evaluate the effect of different terms in the two contracts
2.3.1 Evaluate the Effect of Condition
Case1: Condition is central factor of a contract going to the root of contract. Breach of
condition causes revocation of contract. For example, client repair Z part by unauthorized
person without approval of World Car Parts therefore Z part is not going to be warranted.
The client has made the breach of condition so client can not claim for damages. It is not

mistake of manufacturer as well as World Car Parts so client has to pay for repairing and
changing. Another example is that if sirial numer of X part is altered by the customer then
the X part can not be replaced or repaied by manufacturer. The manufacturer can research
for client's information and terminate the contract. OK
Case2: employer and employee have to abide by condition. If employee makes more than
2 personal leave days as well as 15 days of vacation without informing in advance,
employer can fire the employee and terminate the contract and employee can not claim for
loss. If employer delays payment of salary more than 3 months, employee can claim for
loss and terminate the contract if he wishes to do.
2.3.2 Evaluate the Effect of Warranty
Case1: Warranty is minor term of a contract. Breach of warranty absolutely can not
terminate the contract but injured party have right to claim for loss or damages. If Skoda
Co breaches the warranty, this is two weeks later delivery, WCP will not be able to
terminate the contract but WCP can go to the court and claim for loss of benefit.??????
Case2: if employee imforms that he take more than 15 days vacation, 2 personal leave
days or 10 days sick, employer only deduct employee's salary. Employer con not terminate
the contract because employee inform in advance and may cause minor damages to
2.3.3 Evaluate the Efffect of Innominate term
Case1: It will be classified as innominate term if it is not clear what the effect of breach of
the term was intended to be, so the court will decide the consequence. For instance, World
Car Part accidentally damages a old Y part during fitting a new X part into the car. If the
damage is so serious, the court will decide that the client is entitled to terminate the
contract and claim damages. If not, he will be entitled to damages only. Besides,
innominate term can also be meaning as either condition or warranty, which depends on
the effects of the breach classified by the court. If the parties do not intend to terminate the
contract by breach of a particular term that the contract must be interpreted in the light of
the specific situation, this term can be construed as warranty (Business Law, p 111??).
Case2: employee causes damages to company but emplouyee can redeems his failure or
mistake or employee's mistake is not so serious that company sustains loss. Then the
court will decide that company can not terminare the contract but only claim for damages.
On the other hand, employee causes so serious damage that company lose of benefit.
Then the company is entitled to terminate the contract and claim for loss.
2.3.4 Evaluate the Effect of exclusion clause
Case1: World Car Parts inserts exclusion clause into a contract which aims to limit their
liability for breach of contract or negligence.
There are three importance element in a valid contract and four types of contract.
Parties should consider carefully before making breach of condition or warranty. Breach of
condition causes breach of contract and injured party can claim for damages. If breach of
warranty, injured party only claim for loss. Consequently parties should read terms and

condition carefully before signing a contract.

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