Lord Melbray v the Backstreet Boyos and Basils Bistro - Essay Example

Contract law Introduction The case Lord Melbray v the Backstreet Boyos and Basil’s Bistro requires a full legal analysis, beforea conclusion is reached, and therefore an advice issued to the aggrieved parties. The legal analysis takes the form of a three-stage analysis, the first stage being to assess whether the agreement between these parties would amount to a legally binding agreement, through evaluating whether all the requirements for a legally binding agreement were met by the parties involved. Secondly, the analysis seeks to evaluate whether there was sufficient basis for either party to rescind the contract, or by the party rescinding the contract, a violation of the legal provisions under the contract law were violated. Thirdly, the analysis will consider the available defenses for the defendant in this case, Lord Melbray, allowing him to terminate the contract. Lastly, an advice will be given to the aggrieved parties, in this case Backstreet Boyos and Basil’s Bistro, based on the available legal redress mechanisms. Analysis of whether Lord Melbray v the Backstreet Boyos and Basil’s Bistro was a legally binding agreement The separate agreements, between Lord Melbray and the Backstreet Boyos for entertainment appearance on one hand, and that with the Basil’s Bistro for provision of lunches on the other hand, can be classified as legal contracts. This is because; a contract refers to an agreement that is entered by two individuals or parties voluntarily, with an objective to create a legal obligation for the performance of the agreement1. Lord Melbray approached the Backstreet Boyos and Basil’s Bistro for provision of their respective services during the wedding of his daughter, and the two parties willingly and voluntarily agreed to provide their services. Therefore, the first fundamental requirement for a legally binding agreement was met, since mutual consent acted as the basis of all the parties entering into the contract in question. A case in point is the case Balfour v Balfour 2 KB 571[1919]1, the husband, Mr. Balfour promised to be sending his wife $30 every month after the started living apart, but later rescinded the decision and asked that they separate. The wife sued for the continuous payment of the promised monthly payment, but the court held that since it was a voluntary move by the husband, in a domestic issue, the continued payment was unenforceable, since there was not any intention to make a legally binding agreement1. This step is followed by the evaluation of whether the necessary elements of a legally binding contract were present in the agreement made. For a contract to be considered legally binding; there requires being two basic elements, namely offer, acceptance, and consideration2. The provisions of the law of contract requires that the parties involved must agree on the contractual terms, through a meeting of the minds, without any party giving a diversionary view regarding the contractual terms, which would amount to a counter offer2. A case in example is the Smith v Hughes LR 6 QB 597 [1871], where the ruling held that should the conduct of an individual be that he is acting in a way that a reasonable will would believe that he was assenting to the terms proposed by the other party, then, the man would be bound as though he had intended to fulfill the agreement2. In the case Lord Melbray v the Backstreet Boyos and Basil’s Bistro, the parties involved agreed on the terms of the service, where Lord Melbray was to pay both the Backstreet Boyos and Basil’s Bistro for provision of their respective services, while the parties agreed to these terms, without varying the terms of the agreement. In this case, Lord Melbray made an offer, while the Backstreet Boyos and Basil’s Bistro accepted the offer as given. Consideration is yet another necessary element for an agreement to qualify as a legally binding agreement3. A consideration refers to something of value that the party making a promise, the promissor, should give to the promisee, in return for another thing of value that the party requires3. A case in point, is the case Hamer v. Sidway, 124 N.Y. 538, 27 N.E. 256 N.Y. [1891], in which the ruling held that there must be something of value that is placed, in exchange for another item or activity of value that is to be gained in return3. In the Lord Melbray v the Backstreet Boyos and Basil’s Bistro, Lord Melbray offered ?5,000 to the Backstreet Boyos as the appearance fee, while offering ?10,000 to Basil’s Bistro as the payment for the offer of lunch services. It is therefore prudent to conclude that the agreement made between the parties in this case fitted the requirements of a binding contractual agreement, thus making the parties involved legally liable for any breach of the contract. Analysis of whether there was sufficient basis for either party to rescind the contract While the law of contracts presumes that all the legally binding agreements that different parties have entered into will be performed in strict adherence to the laws, the laws foresaw a situation where it would be necessary for a contract to be rescinded by either the parties to the agreement4. The provisions for the basis of rescinding a contract legally are made classified into two, namely the void and the voidable contracts. A Void contract is the one that cannot be enforced by the law, because it had deficiencies in meeting the legal requirements for a legally binding agreement, from its initial formulation4. On the other hand, a voidable contract is the one that has the potential of being enforced legally, but there still are some provisions that allows either of the parties to the contract to rescind the contract before it is performed, since such contracts entail having only one party to the agreement being bound by the contractual terms, while the other party is unbound5. Therefore, considering that the contractual agreement in the case Lord Melbray v the Backstreet Boyos and Basil’s Bistro fulfills all the requirements of a legally binding agreement, it cannot therefore be categorized as a void contract. The contractual agreement between the parties in this case cannot be categorized as voidable contract also, considering that both parties were bound by the contractual agreement to perform their part of the contract, thus giving none of the parties the room to rescind the contract. Nevertheless, there are various exceptions that allows for the termination of a legally binding agreement. Under the void contracts, the law provides for an exception to the rule, requiring that despite the fact that a contract is considered to be void in case it does not fulfill all the legal requirements for a legally binding agreement, there are circumstances under which a contractual agreement that has met all the legal requirements may still be considered void3. Analysis of Possible claims by the aggrieved parties Having been found that there were no grounds upon which any of the parties should have rescinded the contract, the following are some of the possible provisions of the contract law under which the aggrieved parties could raise their claims: Reliance damages Clause Reliance damages Clause provides that the non-breaching party in a legally binding contract should be paid the value of economic harm that the party incurred, as a result of the termination of the contract5. It is a non-punitive provision for the restoration of the non-breaching party in a contract to their left at the same monetary position they were, before the contract was entered into5. Expectation damages Clause This is a non-punitive provision of the contract law, which provides that in the event of termination of a legal contract, the non-breaching party should be paid the value of expectancy, which is equal to the value that the non-breaching party would have obtained, should the contract not have been terminated6. Legal Provisions for Termination of contracts applicable in Lord Melbray v the Backstreet Boyos and Basil’s Bistro There are two legal clauses that provide for the termination of the Lord Melbray v the Backstreet Boyos and Basil’s Bistro case: The Public Policy Clause The Public Policy Clause is a clause found under the law of contracts, which provides that despite the fact that a contractual agreement could be legal and could have fulfilled all the requirements for a legally binding agreement, the contract may still be considered void6. This clause occurs if form of legal and social guidelines, which requires that common sense should prevail in the performance and delivery of a contract, by upholding that any type of contract that violates the social and legal common sense cannot be enforced in law, thus it is void6. The law therefore requires that a contractual agreement that is binding between two parties can be rescinded and terminated, on the event that there are very genuine, proper, rational and honest reasons that makes one of the parties find it inappropriate to continue delivering the contractual agreement terms5. However, while such a provision allows any party to rescind or terminate the contract on the basis of the Public Policy Clause, it is required that the burden of proof lies with the party that terminated the contract, to demonstrate that the circumstances warranting the termination of the contract were proper, honest and rational6. Case in point: Hadley Design Associates Limited v Westminster London Borough Council. EWHC 1617 (TCC); [2003] Under this case, the Westminster London Borough Council; the defendants in this case, invited Hadley Design Associates Limited on a contract to evaluate and repair the Churchill Gardens Estate, which was found to have severely deteriorated in state, and was becoming a source of concern7. After the council wrote to Hadley Design Associates; a design and architectural company on February 10, 1984, the architectural company responded by submitting a tender to the council, which was accepted through a letter in April 2, 1984, confirming that the terms of the contract were as initially set in the initial letter inviting the Hadley Design Associates (HAD)7. The company assessed the state of the estate and eventually delivered a report in 1987, after which it was agreed by the council and HAD Company that the refurbishment should continue under the supervision of the company. However, while the work was still proceeding, the council wrote to the HAD company informing the company that the contract was to be terminated within a month’s time, on February 15, 19967. The council did not provide any reasons for the termination of the contract, and consequently HAD sued the council, on claims of wrongful termination of the contract. Therefore, HAD sued for the recovery of the profits it could have made from the council, if it had been allowed to complete the contract7. In defense, the council offered that it had terminated the contract for reasons among others; the rise of legal amendments requiring compulsory competitive tendering to be applied in selecting a contractor, as opposed to merely inviting one, seeking their services, as a matter of public policy6. The ruling held that the reasons Westminster London Borough Council offered for terminating the contract were reasonable, proper and honest, in realizing the desired public policy7. The Force majeure Clause This is a legal provision clause under the law of contract, which provides that a party to the contact can rescind or terminate a contract, based on certain chance or unavoidable occurrences, which are beyond the control of either of the parties8. The Force majeure Clause frees both parties to the contract from legal liability or obligations, whenever occurrences that limit the performance and delivery of the contract limit the delivery of the contractual terms8. The extraordinary, or occurrences beyond control that are majorly considered as reasons for rescinding or terminating a contract under the Force majeure Clause include the acts of God such as disease outbreak, war, earthquake, flood, as well as other social occurrences such as crime, riot, and strikes9. However, it is important to acknowledge that in practical terms, the Force majeure Clause does not cause a complete excusal of the parties from fulfilling the contract, but mostly delays the performance of the contract until the extraordinary circumstances or the unavoidable occurrences are no longer in play10. Therefore, while the Force majeure Clause can be applied as a defense on the basis of impossibility or impracticality of performing a contract, it may not be applicable under circumstances where the parties to the agreement could have prevented the occurrences, but did not do everything that was reasonable to deter the occurrence10. Nevertheless, the application of the Force majeure Clause requires that the following three elements must be met by the circumstances, either classified as extraordinary, or circumstances that are not preventable. The first requirements under this clause is principle of externality, which provides that the circumstances should be emanating from external forces, and thus the defendant should not have done anything or contributed in anyway, to the occurrence of the circumstances9. The second principle under the Force majeure Clause is the principle of unpredictability, where it is required that the occurrence of the circumstances should have been unpredictable, and that the defendant had done everything that could prevent such occurrences8. The final principle applicable under the Force majeure Clause is the principle of irresistibility, which provides that the consequences suffered, could not be resisted, thus triggering the termination or suspension of a contract9. Case in point: Thames Valley Power Ltd v TOTAL Gas & Power Ltd, EWHC 2208 [2005] Under this case, TOTAL Gas & Power Ltd; the defendant, entered a contract of supply, to provide Thames Valley Power Ltd; the claimant, with its needed gas supply for its operations for a period of 15 years, starting a date in 1995, where the price of the gas for the period through 1997 was to be fixed11. After that period, the two companies would apply a formula that would provide for the variation of prices for the next duration. Nevertheless, the formulae provided for a minimum price, set at P1 and a ceiling maximum price, set at P3, with only the varying price, P2 running in between the two price limits10. However, on July 5, 2005, TOTAL Gas & Power Ltd issued a letter of notice under the Force majeure Clause, citing he unprecedented increase in the prices of the gas in the UK market, which made it impossible for the company to continue supplying Thames Valley Power Ltd with gas, within the initially set price limits10. This, according to TOTAL Gas & Power Ltd., was an extraordinary occurrence, provided for under the Force majeure Clause, allowing a party to terminate an existing contract. Thames Valley Power Ltd sued TOTAL Gas & Power Ltd for the breach of the contract, upon which the ruling was issued; that the notice issued by TOTAL Gas & Power Ltd. could not be stayed and was therefore dismissed, since the company could have foreseen the occurrence of change in future circumstances, which could change the prices of gas to unprecedented levels10. Available defenses for Lord Melbray allowing for the termination of the contract Under the case Lord Melbray v the Backstreet Boyos and Basil’s Bistro, Lord Melbray can apply the following two legal defenses: The Public Policy Clause Under this clause, Lord Melbray can argue that he terminated the contract based on the principle provided under the Public Policy Clause, which provides that; notwithstanding that an agreement between parties could be legally binding, social and legal common sense should override all the other interests in the delivery of a contract, and thus a legally binding agreement can be terminated based on proper, rational and honest reasons12. In this case, The Ministry of Agriculture appeals to residents of Loamshire, on a voluntary basis, to cancel all outdoor events, due to the outbreak of foot and mouth disease in the region, which could be spread by humans. Therefore, Lord Melbray would argue this was a reasonable, honest and proper reason for terminating the contract. The Force majeure Clause The second legal defense that Lord Melbray would apply is the Force majeure Clause, which provides that any extraordinary occurrence that occurs externally without the contribution of the defendant that was unpredictable, and which was irresistible, is a legal ground for terminating a legally binding agreement13. Since the foot and mouth disease was an occurrence that occurred without the contribution of Lord Melbray, and which was unpredictable and irresistible, it was a legal reason for terminating the contract. Advice to Backstreet Boyos and Basil’s Bistro on the available legal redress mechanisms Considering the fact that the reasons given by Lord Melbray behind the termination of the contract with both the Backstreet Boyos and Basil’s Bistro have a legal basis, the advices given to these aggrieved parties are two: First, it is advised that Backstreet Boyos and Basil’s Bistro should sue Lord Melbray under Expectation damages Clause. This clause provides that in the event of termination of a legal contract, the non-breaching party should be paid the value of expectancy, which is equal to the value that the non-breaching party would have obtained, should the contract not have been terminated14. This will enable the Backstreet Boyos and Basil’s Bistro to scoop the value for which they had been preparing to receive as a result of the occurrence of the wedding function, whose cancellation was not a fault of their own. Secondly, it is advised that Backstreet Boyos and Basil’s Bistro should sue Lord Melbray under Reliance damages Clause, which provides that the non-breaching party in a legally binding contract should be paid the value of economic harm that the party incurred, as a result of the termination of the contract15. Considering that the Backstreet Boyos and Basil’s Bistro had incurred substantial amount of money in preparing for the event, the Reliance damages Clause will ensure they are repaid that amount, and thus will be left at the same monetary position they were, before the contract was entered into16. Bibliography 1Elliott and Quinn, Contract Law 9th edition (Pearson/Longman 2013). 19-56 2E McKendrick, Contract Law 10th edition( Palgrave MacMillan 2013). 14-17 3EA Farnsworth, Contracts (2d ed.), (1990) 36-85. 4R. Bronaugh, ‘Agreement, Mistake, and Objectivity in the Bargain Theory of Conflict’ (1976) 27W M L R. 5PS Atiyah, The Rise and Fall of Freedom of Contract. (Clarendon Press 1979). 63-81 6E McKendrick, Contract Law - Text, Cases and Materials. (Oxford University Press 2012). 30-33 7Hadley Design Associates Limited v Westminster London Borough Council. EWHC 1617 (TCC); [2003] 8R E Barnett, Contracts. (Aspen Publishers 2003). 12-40 9E Sherwin, "Nonmaterial Misrepresentation: Damages, Rescission, and the Possibility of Efficient Fraud" (203). 44-49, 36 L L A L R 10 MB Kelly, “The Phantom Reliance Interest in Tort Damages” 169 S D L R 38(1) 11Thames Valley Power Ltd v TOTAL Gas & Power Ltd, EWHC 2208 [2005] 12S Fruehwald, "Reciprocal Altruism as the Basis for Contract," (2009) 11-13, 47 U L L R 489 13T Steve, and P Siegelman. "willfulness versus expectation: a promisor-based defense of willful breach doctrine." ( 2009) 3-10, 1517-1531 M L R 107.8 14R, Florian, "Contractual Freedom, Contractual Justice, and Contract Law” 4-5, 76 L C P 2 15O Ferraro,”Adjudication and Expectations: Bentham on the Role of Judges” (2013). 140-160 U 25(2) 16M Smith, “Reliance” 135-157 N 44(1) Read More