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Legality of Click Wrap Agreements

  • 08 Pages
  • Published On: 02-12-2023
SECTION A

To proceed with answering the question, the valid requirements to form a legally binding contract must be addressed. For any contract to be leally binding, the following elements must be present:

An agreement that is formed when there is an offer by one party which has been accepted by the other party. There must be legal intention to form a contract between the two parties who have the capacity to enter into an agreement. There must be some consideration to support the agreement be it of services, money, kind etc.

In this scenario, Abdul has been a part of SafeSpace and like any other social media platforms, a relationship is formed between the website owner and the party willing to use the website. Generally, a terms and conditions agreement is reflected while the sign in process develops and that is considered as a binding legal agreement between the two parties as on signing in or setting up the application gains a certain calculated sum of revenue as it also increases traffic in its website, which can be considered a form of consideration or value exchange between the website owner and the user. There is a suitable offer and acceptance through the terms and conditions that may appear at the beginning of signing in process, wherein the user is asked whether they agree with the T&C of the particular website, SafeSpace, in this case. As Abdul recalls that he had ticked a box while signing in , that may establish the beginning of a contract that was created between SafeSpace and Abdul. These form of contracts or agreements are known as Click Wrap agreements, where the user is meant to tick the box reflecting, “I Agree” or any similar statement, to the T&C, making it a binding contract between the two parties. In today’s rising world of internet these virtual contracts are created through these Click Wrap agreements requiring the assent of the user. The pop up dialogue box requiring the assent of the user does not make it obligatory for the user to accept the Terms and Conditions at any cost and also provides with a negative option that may cease the process of formation of the contract at that point. Thus, The relationship established between SafeSpace and Abdul can be considered as a legally binding contract. Especially, all the elements of a valid contract as discussed above is clearly present.

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b. State the statutory protections that exist for consumers to protect against one sided contract terms imposed by businesses?

The Consumer protection Act does not explicitly provide any protection towards the consumers in case of one sided contracts.

i. Giving your reasons, advise the board of Freshco as to whether this is a redundancy situation and advise them of the steps they must take to ensure that any redundancy process is lawful.

Ans. Redundancy generally occurs when there is a general dismissal of the employees in a company where the company is suffering some losses or changes that forces the company or the employers to cease the business on the whole or the dismissal has erupted due to a change in the action plan or course of business that may be determined. This change fails to incorporate the existing employees skill set or facilitate the primary reason as to why they were employed in the first place. It is first important to analyse the scenario, the capacity and strength of the company to determine whether a redundant situation has risen or not. In this case, Freshco had suffered a severe loss of £1.5m and a steady decline in store trading has been seen. Thus, to recover such loss strategic changes in the business is highly desirable which why there is an urgent need of cost reduction within the physical stores that are planted all over UK. In the need to close 10 stores, many employees would be either relocated or made redundant, which has been calculated to be about 70 such employees. Thus, definitely, assessing the losses and decline in store trading and the urgent need to revamp the business does call for genuine cost cutting, thus declaring it to be a redundant situation.

There are a few steps that are taken to conduct a lawful process of redundancy:

A solid business plan must be formulated and a reason must e established that reflects the position of the company that has decided to declare redundancy. It is important for the companies to reflect the genuine reasons as to why few post needs to be eradicated and show the need to employ newer position requiring different skill set to align with the new strategy of the business.

A formal written letter to the staffs is a mandate to inform them about the position of the company and the need to carry out the redundancy. The risk of redundancy must be evaluated and informed to potential staffs or groups of staffs.

It is important to take consultation meetings where at least three meetings are to be held to hold a fair criteria of selecting such people from the designated at risk group of staffs.

Lastly, all other possible alternatives must be discussed within the meetings to make such strategic changes without the dismissal or minimalizing such dismissal of staffs.

Advise Sandra and Simon as to whether they can refuse the new positions being offered them. Your answer should refer to relevant case law. Also advise them as to what their likely redundancy pay would be if they are made redundant. You should provide details of the calculation.

Ans. The most important criteria that needs to be checked is whether the refusal of alternative job is reasonable or not. In this case the position of Sandra and Simon have been working for 18 months and 10 years respectively earning £420 and £ 490 per week respectively. The alternative job offered to Sandra and Simon are at a lot lower pay, far away from Simon’s house and considering Sandra’s position in her family, the alternative job does not seem reasonable and does not benefit both of them at any cost. Under sections 141(2) and 141(3)(b) of the Employment Rights Act 1996 a tribunal generally considers whether the alternative job is suitable for the dismissed candidates or is refusal reasonable or not. In this case, the refusal for such an alternative job is definitely reasonable. However, FreshCo has set up a clause that the refusal of the job will result in losing their redundancy pay. In the case of Dunne v Colin & Avril Ltd T/A Card Outlet UKEAT/0293/16/DA, the refusal of alternative job was considered reasonable by the court even though the reason was undisclosed, but it has highlighted the fact that as long as the refusal is reasonable, the employees are eligible to get redundancy pay.

Calculation of Redundancy Pay:

Sandra – Since she is 27 years old, she qualifies to be paid one weeks pay but she has worked only one whole year which means she gets only £420 for the whole year.

Simon – Since he is 42 years old, he receives payment of 1.5 weeks for 10 years of his service; £490*1.5*10(years)*52 (weeks) = £382200.

(a) Advise the directors as to the different types of arrangement they may enter into under the insolvency rules and which would be most suitable in the circumstances.

Given FreshCo’s current scenario, the directors can approach for different kinds of arrangements under insolvency rules:

  1. Freshco can opt for bankruptcy petitions before courts especially by creditors owning more than £750. Or,
  2. The company make an arrangement with the creditors to assist in paying off the debts as per the time permits and decided by the company and the creditor. This Company Voluntary Arrangement is initiated by the company in the form of a proposal that is drafted to be sent to the Creditors to pay the debts owed by the company. If this proposal is accepted by the creditors, then the process will be legally binding on both the parties and the directors will still have full power and control over FreshCo., or,
  3. The Company also can wind up the company wherein the petition to compulsorily liquidate the company may be presented before the court. The Insolvency Practitioner is to be appointed to investigates the assets of the company and take over the assets. The liquidator is appointed who assimilates the assets of the company and determines the order in which the payment is to be created and paid to all parties, the creditors by prioritizing such payments.
  4. The Creditors can also voluntarily liquidate where the shareholders have a role to wind up the company, in which case, no petition is to be presented before the court. The liquidator has the same role by realizing assets and determine te process of distribution.
  5. Lastly, in case of limited companies, the Administrators are to be appointed in case the company fails to pay debts where the administrator as appointed by the courts determines the floating charges of the assets in the business. Administrators play a significant role as it has the aim to rescue the falling company and plays a better role than appointed creditors.

C. Process:

  1. A liquidator is appointed who realizes the assets of the company.
  2. A meeting is held to discuss the status of the company and to ascertain that the company is to be declared insolvent. The director’s meeting analyses the situation and determines the course of action.
  3. If a “ Consent to a short notice” is signed by ninety percent of the company’s shareholders , then a meeting can be called for but otherwise, a term period of fourteen days will be required for the meeting of the shareholders.
  4. In case the Shareholders do meet then they decide whether company is to be liquidated and then decide or agree to the liquidator confirmed by the director.
  5. The Creditors meeting is equally important and called within a period of 7 days. After the meeting the process of liquidation begins.
  6. SECTION B –

  7. Written Agreement
  8. To attend a minimum of two board meetings per year
  9. An Invitation to Treat
  10. If an unlawful dividend is paid, the directors may be personally liable
  11. Ratio Decidendi
  12. 12 weeks
  13. Damages must be of a type that is reasonably foreseeable
  14. Within the contract of employment
  15. A company’s ability to buy or sell assets subject to a fixed charge is limited, whereas a company may freely buy or sell assets subject to a floating charge
  16. Laws created by judges through the deciding of cases
  17. 18. Compare and contrast Ordinary Shares with Preference Shares.

SECTION C:

Shareholders in a company differs according to the size of the company, which in cases of a small company is generally the directors. However, there are two categories of equity shares known as Ordinary and Preference shares. The two kinds of shares have a few differences which are discussed below.

Ordinary Shares:

The ordinary shareholders have a directly proportional relationship with the company’s growth or earned profits or losses suffered. The ordinary shareholders are given the power to have a say and have voting rights in cases of any resolutions that maybe brought forward. Their votes allow the directors to actually give assent to any decision and in case of any negative approach, the directors are prompted to rethink their move regarding the decision. Profits are also shared by the ordinary shareholders through the dividends that are received by the company. It is also such that the dividend that is to be distributed annually are to be ratified by the ordinary shareholders and only then can it be considered as payable even though the ordinary shareholders do not have a say in the amount of dividend payable and depends completely on the company’s profits. In case of winding up of a company, it is the ordinary shareholders that receive their payment after all other beneficiaries are paid. They take direct responsibility of the losses suffered.

Preference Shareholders

The difference between ordinary shareholders and preference shareholders are determined by the company’s policies and rules framed in its Articles of Association. Preference shares have a mixed characteristic of both debts even though it is primarily an equity investment. The name itself explains that these shareholders hold a superior or a more preferenced position in contrast to the ordinary shareholders be it with respect to the profits earned or distribution of assets or in cases of a bankrupt company. Generally, these shareholders do not possess any form of voting rights but in case their own dividends have defaulted and failed to pay them the same, they may have a say in that case. However, a fixed form of dividends is generally received by them. They are given more preference than ordinary shareholders with respect to profits at any time. There are different forms and types of Preference shareholders like Cumulative, Non-Cumulative and Participative. Cumulative Preference shareholders would receive accumulated dividends. If the company has earned sufficient profit, in that case, the dividends would be accumulated as arrears as opposed to in a non-cumulative scenario, where it will not accumulate as arrears and the dividend earned in the first year shall not be considered. However, the third category of preference shareholder, allows the shareholder to be a part of extra profits that may have been earned by the company. It can be both convertible in nature or redeemable at desired terms.

20. Compare and contrast conditions, warranties, and innominate terms.

Conditions:

A condition can be considered the main core that forms any contractual agreement between the parties. Conditions are re-instated in a contract as a clause for the parties in agreement to fulfill their part of conditions as incorporated in the contract. With regards to any goods, conditions help in determining the time or state in which the goods are to be delivered. Failing to fulfill a condition allows the other party to move forward disregarding the terms of the contract as well as take legal action to get damages if any injury caused due to such breach. The only question to look for if there has been any repudiatory breach while the conditions were breached.

Warranty:

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A contractual warranty functions as a promise or an obligation that ascertains that the subject of the contract that has been created stands true to their knowledge and in case of any default or breach of the stated statements, the warranties shall stand as a shield to protect the other party to help cover the damages that may have been caused due to such breach. It is incorporated in the contract by foreseeing any such situations that may arise in future. In comparison to a condition incorporated, the warranties are weaker but any breach of such also allows the party at loss to take legal action to sue for damages but unlike conditions, they do not have the provision to completely disregard the contract and function as if it did not exist in the first place. If they do terminate the contract on such breach of warranty, that part may be held for unjust termination of the contractual agreement.

Innominate terms:

There are many kinds of clauses within a contractual agreement that determine whether it can be classified as a warranty or a condition. However, there are other terms as well that cannot be categorize in either of the above discussed categories. In that case, those terms are considered as Innominate terms. In case of any innominate terms that holds sufficient importance in the contractual agreement is breached by either party, the other party has the power to disregard the contract or terminate the contract unlike in cases of Warranties. However, it also depends on the role such an innominate terms play in the contract. If an innominate term isn’t as valued and does not play a significant role in the contract, in that case the innocent party cannot hold it as an excuse and terminate the contract, that would be considered baseless. Also, in case of any breach by one party, if that party is also deprived of the benefits that may be accrued through the contract, then that innominate term will no longer remain innominate and fall under the category of conditions, which would allow the party to terminate the contract, if they desires otherwise, such shall be deemed as a warranty where there would be window to claim damages.

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