The Contract Law - Report Example

Contract Law Part A The contract with BBL entailed the construction of a concert hall. Simon had engaged a pop music group to perform during the inauguration of this hall. Due to the malfunctioning of the concrete mixers, the construction work was deferred by a month. The losses incurred by Simon, due to this delay, were £ 10,000 on advanced ticket bookings, £ 30,000 profits from expected sales of t – shirts and Compact Disks from the latest recordings of the pop music group, and £ 20,000 on advertising. In order to advice Simon, regarding the remedies available to him, in respect of the losses caused to him due to non performance of the contract, the doctrine of frustration has to be examined to assess whether the termination of the contract was effected by an unprecedented and unforeseeable event. It is difficult to precisely define what constitutes a frustrating event. This is on account of the fact that such definition relies to a major extent on the nature of the contract and the facts of the case. A frustrating event should significantly affect the contractual obligations of the parties.1 It constitutes grounds for refusing performance, as initially agreed upon, due to the impossibility for executing such performance. A party to a contract is precluded from claiming frustration for evading performance of the contract; in the event of the contract becoming more difficult to perform; if that party were partly responsible for the overriding occurrence; of if the intervening event was predictable.2 The parties to a contract are under no compulsion to fulfil their contractual obligations, if frustration transpires. In our problem, the failure of the concrete mixer is not an unforeseeable event. It might have proved a bit more expensive than usual, for the BBL Company to have fulfilled its part of the agreement, if it had made alternate arrangements. Therefore, it cannot claim that the performance of the contract had become impossible or more burdensome, on account of the increased cost. The following case law reveals the attitude of the courts in deciding cases relating to issues of frustration. In Davies Contractors v Fareham UDC, the cost of construction changed substantially, due to shortage of labour and the consequent delay. The building contractors sought to establish a frustration of contract, and thereby claim a higher remuneration.3 The court rejected this plea and held that the delay was commercially anticipatable and had not effected any basic changes. Thus, the courts do not permit a party to a contract to evade performance of the contract on grounds of frustration, if the true reason is that the contract has become more expensive to perform.4 In Paradine v Jane, the court ruled that if a party to a contract is unable to perform a duty enjoined by law, due to no fault of his own, then he is exonerated. However, if the party had created a duty whilst forming the contract, then he is bound to perform it.5 The doctrine of frustration states that under certain circumstances, a party to a contract is absolved from performing his contractual duties. This was reiterated in the decisions in Taylor v Caldwell,6 the Coronation cases and Davies Contractors Ltd v Fareham UDC.7 Although legislation was enacted, in order to modify the common law, with respect to the consequences of frustration, a precise description as to when frustration would transpire was not specified.8 As per the case law discussed, the BBL Company cannot invoke the doctrine of Frustration for its non performance of the contract. It should have taken steps for making alternative arrangements, in case of failure of the concrete mixer. Hence the company is liable for breach of contract under the provisions of Contract law. Simon can sue the BBL Company for the losses sustained by him. The losses suffered by Simon, due to this delay are; £ 10,000 on advanced ticket bookings, £ 30,000 profits from expected sales and £ 20,000 on advertising. These can be claimed from the BBL Company. Part B The second contract was with RRL, wherein the latter was to construct wardrobes for the bedrooms of one of the hotels owned by Simon. The deficient workmanship of one of the workmen resulted in extensive damage to a Persian carpet, valued at £ 15, 000. The crashing of the wardrobe, caused Simon to rush headlong into the bedroom, where he tripped over a computer cable that had been negligently left there by the electricians. As a consequence, Simon fractured both his legs, and was confined to the hospital for six days. RRL quoted its exclusion clause, in an attempt to circumvent liability for these incidents. The Supply of Goods and Services Act 1982, requires a service provider to exercise reasonable care and possess adequate expertise, while providing services to consumers.9 Moreover, the service has to be completed within a reasonable period of time.10 In our present problem, the professional negligence of one of RRL’s workmen, caused damage to the Persian carpet. This loss will have to be borne by RRL, because as an established company, it should have exercised greater care, while manufacturing and installing wardrobes. On occasion, exemption clauses in contracts tend to exclude the liability of a party to the contract. The statute makes it very clear that liability cannot be excluded or limited, by exclusion clauses, in instances entailing negligence that resulted in death or injury. In addition, liability for negligence cannot be limited or excluded, if there is loss or damage, if the term of notice is not reasonable.11 In Levison v. Patent Steam Carpet Cleaning Co, a contract for cleaning carpets specifically included a clause, which attempted to circumvent liability by stating that merchandise was accepted, solely at the owner’s risk. The plaintiff initiated legal action against the defendants, for the theft of his carpet, which was reported lost by the latter.12 The Court of Appeal held the cleaning company liable, and ruled that the burden of proof lay upon them. The courts enjoy substantial discretion, under the Unfair Contract Terms Act, with regard to ascertaining the reasonableness of exclusion clauses. On approaching a court, in order to seek remedial, the parties to a contract have to establish the reasonableness of exclusion clauses, incorporated in their contractual agreement.13 The employment of exclusion clauses in contracts is subject to several pieces of legislation, like the Unfair Contract Terms Act 1977 and the Unfair Terms of the Consumer Contract Regulations 1999. “The UCTA makes a business liable for not fulfilling obligations or duties that are consequent to what has been done or is to be done in the normal course of business”.14 Thus, exclusion clauses are required to comply with some legal necessities, if they are to be deemed to be reasonable. In Thornton v Shoe Lane Parking, the plaintiff suffered an injury, whilst parking his car in the defendant’s car park. The court held the defendant company liable for the injury caused to the plaintiff. The contract was deemed to have been completed when the plaintiff had entered the parking place, which took place, prior to his being issued a ticket.15 Since, there is a loss to property the court did not permit the invocation of the exclusion clause. As per the case law discussed above, RRL cannot evade liability based on exclusion clauses. This is due to the reason that exclusion clauses do not provide a defence, in cases involving personal injury or damage to property, under the provisions of the Unfair Contract Terms Act 1982 and the Unfair Terms in Consumer Contracts Regulations 1994. Therefore, Simon can also make a claim for redressal of the losses caused to him due to the faulty workmanship of the RRL Company, under the provisions of the Supply of Goods and Services Act, for having provided him with defective services. Hence, he can also claim damages for the losses suffered by him due to the negligent services of the RRL Company. Part C The contract with PPL concerned the printing of leaflets to be used in the launching of Simon’s new real estate project. Peter, one of the directors of PPL, informed Simon that his company was one of the best in that line of activity, used the latest machines and was the least expensive. Simon ordered 10, 000 leaflets to be printed, and on delivery found that 3, 000 of these were not printed properly. Moreover, the paper used was markedly of an inferior quality. Simon terminated the contract with PPL and refused to make any payment. Subsequently, PPLs contention proved to be false. Under the provisions of the Sale of Goods Act 1979, goods sold in the course of business should be of satisfactory quality.16 Section 14(2) of the Sale of Goods Act 1979 requires goods sold in the course of business to be of satisfactory quality. Moreover, there is an implied term in consumer contracts that goods sold in the course of business should be fit for the purpose for which they are sold, of satisfactory quality, and should be in conformity with their description; otherwise a material breach is said to have taken place.17 The breach of an implied contractual term is tantamount to violation of the statute. Consequently, a buyer can reject such goods and claim a total refund of the price paid by him. Such claim is unaffected by his having used the goods. This was demonstrated in Godley v Perry, where it was held that an implied term under the Sale of Goods Act 1979 had been breached, on account of the defect in the goods sold.18 There is no necessity to establish mens rea for proving deceit. This was the ruling in Derry v Peek, wherein it was held that it was sufficient for the plaintiff to establish that the defendant believed or knew that the statement made by him was untrue.19 Moreover, the purported contract between Peter and Simon, involves the breach of an implied contractual term by Peter. In our problem, one of the PPL directors declared to Simon that their company was the best and least expensive in the printing field. Lured by this statement, Simon placed an order with them for printing leaflets. This statement proved to be false. As such, the fraudulent misrepresentation made by Peters, served to induce Simon to enter into a contract and this caused him to suffer losses. Simon can claim damages for the losses caused by the false description and inducement, made by Simon, under the provisions of the Misrepresentation Act.20 Several remedies have been specified, in respect of a breach of contract of sale. These remedies include rejection and full refund, replacement, partial refund and repair.21 Hence, Simon can claim a full refund or reject the contract, in addition to claiming damages against PPL. Bibliography Alexander Ehlert, ‘Frustration and Force Majeure and Unmoeglichkeit and Wegfall der Geschaeftsgrundlage, the legal consequences of excused inability to perform a contract’ (2001) 1(2) ILN accessed 5 May 2010. David Kelly, Ann E M Holmes and Ruth Hayward, Business law (5th edn Routledge Cavendish, 2005) 179 Davis Contractors Ltd v Fareham UDC (1956) AC 696 Derry v Peek (1889) 4 AC 337 Ewan McKendrick, ‘Force majeure and frustration of contract’ (1992) 108 LQR 344, 345 Godley v Perry (1960)1 All ER 36 Levison v Patent Steam Carpet Cleaning Co Ltd (1977) 3 All ER 498 Misrepresentation Act 1967 Paradine v. Jane, Aleyn 26 (1647) 82 ER 897 Sale of Goods Act 1979 Supply of Goods and Services Act 1982 Taylor v Caldwell (1863) 3 B & S 826 Thornton v Shoe Lane Parking (1971) 1 All ER 686 Unfair Contract Terms Act 1977 Read More