Question

Ziggy Sounds Ltd is a music production company. It frequently needs to update its equipment as technology develops and styles change. For many years, it has contracted with David Jones Inc (DJI) to create and supply all of its computerized components. A new contract was created each time that Ziggy required something new from DJI, but those contracts always were based on DJI’s standard form contract (a pre-prepared document that sets out the parties’ rights and obligations) and they always included precisely the same promises regarding the quality of the goods. DJI, however, recently came under new ownership and the owners are very cautious people. They generally want to carry on business as usual, but they are not yet sure that they are willing to provide the same promises regarding the quality of their company’s goods. Ziggy recently sent a purchase order to DJI. DJI responded by sending back its usual standard form contract, containing all of the usual promises, but with one new phrase added: "This agreement is subject to formal contract." Although DJI’s new owners intended to redraft its standard form contract, its workers immediately went ahead by creating the requested component and sending it to Ziggy. Ziggy paid, but within a few days, it discovered that the component was defective. When Ziggy indicated that it intended to sue for breach of contract, DJI’s owners said that there was no contract.

Question

Are they right?

Answer 1

No, the owners of DJI are not right. Ziggy Sounds Ltd can sue for breach of contract.

Step-by-step explanation:

The owners of DJI are not right. In this case, Ziggy Sounds Ltd and DJI have a longstanding business relationship, and their agreements have always been based on DJI's standard form contract. This contract has always included the same promises regarding the quality of the goods. Although DJI's new owners added the phrase 'This agreement is subject to formal contract' to the latest contract, the workers at DJI proceeded with creating and delivering the requested component. By doing so, they accepted the terms of the contract, including the promises regarding the quality of the goods. Therefore, DJI can be held responsible for the defective component and Ziggy Sounds Ltd can sue for breach of contract.