Phenomenon of the Contract Law - Assignment Example

? CONTRACT LAW By Contract Law A contract always intends to legalize an agreement between the parties involvedregarding the matter in question. Contracts involve many issues such as sale of property, settlement of disputes, and service performance among others. Therefore, a contract is enforceable on condition that it crystallizes the essential elements that the law requires that in manifests (Elliott & Quinn 2011). There parties entering the contract must mutually understand what the contract purports to cover. This phenomenon is called ‘meeting of the minds.’ There must be offer and acceptance in a legally binding contract. The contract constitutes an offer to one party and the consequent acceptance by the other party. The element of offer and acceptance thus involves the expression of willingness of both parties to complete the contract. The parties entering the contract must belong to the age of the majority. However, some contracts may involve the minors such as the contract of will. There must be a possibility of performance in a legally binding contract. The contract must be physically or legally performable. The contract must portray the intention to create legal relations. A general principle, the social promises are presumed not to be legally binding (Turner & Martin 2004). There must be legal consideration in a contract. The legal consideration constitutes the value of the exchange depending on the nature of the objects present in a contract. There must be a legal object in a contract. The contract should not, by nature violate the policy of the public. Otherwise, illegal contracts are enforceable. However, a contract that has all the essential elements is valid. The contract that lacks all the essential elements is otherwise void. Therefore, the most crucial facets of contact law are the existence of the contract and the determination of the validity of the contract (Elliott & Quinn 2011). A Case Brief To: From: Date: Case 1 Facts Cynthia is a prostitute. She attracts her clients by sitting on a high stool in her downstairs front room. Someone broke the window by throwing a brick through it. She hires Adam, a glazier, to replace the window with distinctive toughened glass and also to enlarge the window for a better view. Adam does work, but Cynthia refuses to pay him. Issue Whether the contract is illegal or not Rule The damages arising from the material contributions of an individual to the performance of an illegal act, with the knowledge that the materials are intend to propagate the illegal activities are irrecoverable. The claim by the plaintiff is aims at settlement of the payments using the earnings from the illegal business. Analysis The case between Adam and Cynthia constitutes illegality by virtue of the element of prostitution. Prostitution at common law is always an act that promotes sexual immorality. All acts that promote sexual immorality are prohibited hence are unenforceable. The difference between an illegal act and an immoral act is so thin that the applied principles are similar in either case. The case of Pearce v Brooks (1866) Lr 1 Ex 213 Exch tries to explain the nature of this case. In the case, Pear the plaintiffs, Pearce coach builders allowed Brooks, the prostitute to hire their brougham. Brooks was going to use the brougham in her prostitution business of attracting her clients. At common law, contracts that promote sexual immorality are unenforceable due to their illegality. Pearce was aware of the business that that Brooks was going to transact, prostitution. Brooks refused to honor the obligations of the contract. Pearce claimed compensation for the damages but, the court refused. The court held that he had participated in an illegal contract with the knowledge of its illegality. The jury did find no evidence that the payments that Pearce was claiming from Brooks were to be derived from the illegal business. However, there were reasonable grounds to believe that Pearce while giving out the brougham for hire knew that Brooks was a prostitute and that the brougham was to be used in the prostitution promotion. The same principles were also applied in the case of M ’Kinnell v. Robinson by Lord Abinger. In case, the judgment held that money lent for gaming may be recovered give the gaming is not illegal in France (Turner & Martin 2004). Conclusion Therefore, the contract is illegal and Adam may not recover the damages. Advice Adam may receive the monetary payments on the materials and labour upon challenging the illegality. He must prove that at the time of entering the contract, he never knew that Cynthia was a prostitute. This will nullify the argument that the materials were meant to promote immorality and that the proceeds would automatically emerge from the unlawful act. Case 2 Facts Maria consults her bank manager, Mr. Mohamed, over her plans to sell her house. Maria is a widow and frequently consults Mr. Mohamed on financial and personal matters. When told that Maria intends to sell her house, Mr. Mohamed offers to obtain it at the current market price. Maria accepts the offer, and completes the sale. The price of the house later after six months rose by 25%, and Maria seeks to have the sale of the house set aside, claiming that Mr. Mohamed has taken advantage of his position as Maria’s bank manager. Issue Whether Maria can terminate the contract of the sale of the house, on grounds that Mr. Mohamed has taken advantage of his position as Maria's bank manager and seek for a remedy besides setting aside the contract of sale of the house or not Rule If, in the course of entering the contract or shortly after the contact was entered into, the parties to the contract were in a specific confidential relationship. All contracts entered into under undue influence are voidable by the injured party and the available remedy is rescission (Elliott & Quinn 2011). Analysis The parties seeking rescission must freely accept to surrender all the benefits that they have received from the contract. The principle of the doctrine is protection from loss of property due to trickery, misrepresentation or force. The principle does not guarantee protection from loss of property resulting from the consequences of one's own faults. The law defines the nature of the relationship as that that enables the claiming weaker party to have trusted and believed in the terms as stated in the contract by the stronger party. The magnitude of the relationship should be comparable to that which exists between the guardian and the child. In most jurisdictions, the burden of disproof of undue influence lies on the defendant. The court must critically examine the conditions relating to the susceptibility of the victim such as dependency (Turner & Martin 2004). If the relationship falls within class 2 B, the claimant must prove the sole existence of a relationship that satisfies the conditions of trust and confidence. The absence of evidence to disapprove the existence allows the claimant to succeed in setting aside the contract. In the case, Allcard v Skinner [1961], the relationship was characterized by advice and property management that proved the trust and confidence in the judgment. The case of Zamet v Hyman [1961] was also successful based on the condour and protection (Elliott & Quinn 2011). The principle of the undue influence is protection of the dependent and vulnerable persons such as the relationship between the guardian and the child. The case of Yerkey v Jones [1939] examined the aspect of independent advice by the defendant before entering the contract. The ruling held that the advice by the third party does not automatically render presumed undue influence void. The court must critically examine the nature of the breach before making the final decision (Furmston, Cheshire & Fifoot 2006). Conclusion Maria can set aside the contract of sale of the house under due influence. Maria can seek the remedy of rescission. Advice Maria may retain her initial position as before the contract through seeking rescission. She must be ready to manifest the relationship between them as to that which amounts to trust and confidence. This will show the magnitude of her dependency on Mohamed that might eventually ascertain the presumed undue influence. Case 3 Facts A- Ahmed owns a business selling light aircraft. On one occasion, a man enters his premises and offers to buy the latest Cessna 340. He produces his Platinum American express card with the name Richard Branson printed on it. Ahmed has heard of Richard Branson, the multi millionaire and not wishing to lose the sale he accepts the credit card. Unfortunately, his credit card transaction machine fails. The man offers to pay by cheque; this also has R. Branson printed on it. He accepts the cheque and the man asks for delivery the following week. Ahmed has since realized that the man was a rogue, his cheque was valueless, and he has since sold it on to a third party, Arnold Lakers who refuses to return it. B- As a result of the various representations made by Ahmed , Diana decides to purchase the aircraft. Consequently, hands in her notice, terminating her present employment and lets her flat on a three-year lease. She purchases the plane for ?500,000, and sets up a company to run the business. The trial flight proves unsatisfactory as to both the distance and speed she had been assured of the plane. She consequently had to abandon her business plan, and sold the aircraft for ?100,000 less than the purchase price. Issue Whether there are possible remedies in both cases A and B or not Rule A: Face to face transactions create a presumed legal intention of contracting with the party physically present and not the third party. B: The representative has a reasonable duty of care to ensure that the information delivered to the client is factual (Turner & Martin 2004). Analysis A This case constitutes a mistaken identity that renders the contract voidable. The case of Phillips v Brooks Ltd 1919 tries to answer this question. In the case, Phillips, the jeweler made sales to the impersonator, North in the name of a famous merchant, Sir George Bullough. North sold the jewelry to another businessperson, Brooks. Phillips sued Brooks for the damages. The court held that the third party was not liable for damages based on principles that were set out in the American case of Edmunds v Merchants ‘ Despatch Transportation Co. In this ruling, it was held that fraudulent impersonation in the name of the person makes the impersonator liable possesses the goods. Additionally, if the impersonator acts in the cover as a relative of the famous merchant, then possession of the goods passes to the merchant. The claim by the plaintiff failed. Similarly, the case of Ingram v Little (1960) also demonstrates this trend of ruling. Here, the Igram daughters sold a car to a rogue in the name of Mr. Hutchison by a cheque that was dishonored. The rogue sold the car Mr. Little. Mr. Little was sued by the plaintiffs. The court of Appeal held that the contract by virtue of mistake was void. The plaintiffs had the intention of selling the car on cash terms but could only offer it by cheque to Mr. Hutchison. (Furmston, Cheshire & Fifoot 2006). Advice The law expects Ahmed to have repudiated the contract before the rogue made the sales to Arnold Lakers. This case constitutes a mistake to identity that renders the contract voidable, not immediately void. Therefore, he has to prove this or else, Arnold Lakers will be protected. The aspect of prior repudiation will declare the original contract void and so do the later contract. B This situation reveals of discovery of falsity that also amounts to misrepresentation. It is not jurisprudent for a representative to hold the false knowledge, having detected that the initial reliable information has become false. In Brownlie v Campbell [1880] 5 App Cas 925 at 950, the decision held that the silence by the representative upon realizing the correct information that ought to be totals to fraud. The representative is charged with the duty of correcting the emerging falsehood noted immediately or shortly after the contract. The true information must be upheld until the parties enter the contract. The principles in Doyle v Olby (ironmongers) Ltd [1969] 2QB 158 held that when the plaintiff is aware of fraud, the mitigation of losses is necessary. Once the fraud is out of the plaintiff’s mind, he should sell the property immediately. The sale will allow him to receive the damages of value difference. The principles were later applied in the cases of East v Maure [1991] 1 WLR 467 and Downs v Chappel [1997]1 WLR 426. It was held that all the direct costs derived from the breach are reasonably claimable (Turner & Martin 2004). Conclusion There are possible remedies that may arise from the cases A and B. Advice Ahmed should insist that the information that he gave was correct to his knowledge. This will enable the misrepresentation to be innocent. The court will charge him the value difference of the purchase and sales and other costs derivative from the breach on favorable grounds. Case 4 Facts Elliott and Sons, the contractor is in breach of contract with a hotelier, a group known as Hassan Enterprises. The term of the contract requires the builder to complete the modernization of the hotel by the first week of December in a reasonable time for the Christmas celebration. Advance bookings have already been received and confirmed by the hotelier’s manager, to the knowledge of the Contractor. The contractor has pledged various reasons for the delay, from late delivery of supplies to his head foreman being seriously ill. Issues What damages the hotelier will receive from the breach? What are the two limbs as to the test of remoteness of damages set out in Hadley v Baxendale? How this rule was restated in Victoria Laundry v Newman Industries? What is the appropriate measure of damages? Is it the expectation loss or the reliance loss? Explain the difference. Would damages for mental distress be a relevant award? What mitigating factors might the hotelier pursue to mitigate his loss? Can the Contractor raise the issue of frustration as his foreman is laid off due to serious illness? Rules and Analysis A contract can be discharged by frustration due to subsequent impossibility. The parties can be excused from further obligations under the clause of force majeur or the statute of frustration doctrine in the absence of the force majeur clause in the contract. The contractor is paid the expenses that he has incurred in the work already done. In the case, Davis v Fareham UCD [1956] AC 696 (HL) the payment on quantum meruit was rejected on grounds of being unreasonable. The parties should imply the foreseeable consequential impossibilities by creating the force majeur clause (Furmston, Cheshire & Fifoot 2006). Mitigation of loss The law of contract holds it that it is the duty of the plaintiff to minimize the magnitude of the loss to be suffered in case of the breach by the defendant. The rules have been set and standardized with this respect. The plaintiff cannot under any circumstances recover the losses that were avoidable if the plaintiff could have taken reasonable actions to curb the impending losses. Similarly, the plaintiff cannot recover the losses that had avoided regardless of the efforts put to avoid such losses. However, the law recognizes the recovery of the losses that the plaintiff struggled to mitigate even though, the plaintiff never succeeded (Elliott & Quinn 2011). The plaintiff should strive at all times to minimize the expected losses from a breach. If he fails, he cannot recover the losses from the defendant as the case Payzu v Saunders [1919] 2 KB 581 depicts. On the other hand, the law does not allow the plaintiff to take a risk in the course of reducing the losses resulting from the breach by the defendant as illustrated in the case of Pilkington v Wood [1953] Ch 770. The benefits that have accrued to the plaintiff in the process of mitigating the losses must be accounted for by the court in the course of determining the damages recoverable by the plaintiff. This facet of the contract law is demonstrated in the case of British Westinghouse v Underground Electric Railway of London [1912] AC 673 (Turner & Martin 2004). Remoteness of damages The plaintiff cannot recover all losses from a breach. Some losses are too remote, hence unrecoverable. Under Hadley v Baxendale [1849] 9 Exch 341, the two limbs include: First losses are recoverable if they fall within the contemplation of the parties. These losses must be fair, reasonable and naturally capable of arising from the breach. Secondly, recoverability of damages may also be supposed to have been within the parties’ contemplation at the time of entering the contract. The court held that the claimant was entitled to recover the damages that would have been received without the breach occurring. The court also held that the existence of peculiar circumstances when the contract came into effect guarantees the natural flow of damages from the breach (Elliott & Quinn 2011). Later, the court of Appeal sought to review and restate the principles that govern the extent to which damages ought to be measured in Laundry v Newman Industries [1949] 2 KB528. In the ruling, the judge of the court of Appeal, Asquith L J, maintained the rule that the defendant is liable for damages that naturally arise from the breach or damages that were contemplated by the parties when the contract was signed. The defendant was only liable for the ordinary losses that could have been realized by the claimant from other lucrative contracts not known to the defendant. The court maintained that the defendant would have only been liable for damages if he had the sufficient knowledge about the same. This way, the defendant is held liable responsible for the damage and acceptance of liability would be on reasonable grounds (Elliott & Quinn 2011). Measure of damages There are several methods for recovering damages from a breach by the defendant. Therefore, it is the responsibility of the claimant to of one that suits the case under scrutiny by the jurisdiction. For this case, the appropriate measure of damages is the expectation loss, not the reliance loss, though; it has potential exemptions and limitations as well. The expectation loss aims at restoration of the plaintiff's position had the contract been completed as was agreed. It ensures that the delay damages are recovered to restore the expectation interest of the plaintiff. Expectation loss as a monetary measure is subject to potential exemptions and limitations regarding the general rule on measure of damages. The defendant must have demonstrated the duty of mitigation by taking the reasonable actions, failure upon which the measures cease to exist. The calculations should not be based on speculations but rather certain facts that are reasonable. The consequential damages must be known or be predictable to be guaranteed. The expected value should not surpass the market value of the complete performance, otherwise it would be reduced. Reliance loss, on the other hand, ensures that the plaintiff gains the original financial position as when the contract was not in existence. It is mostly applicable when the expectation loss criterion fails to propagate the matter in question (Furmston, Cheshire & Fifoot 2006). Damages for mental distress Damages for mental distress are awarded if the loss is reasonable to presume that such loss would have naturally flown from such an incidence. It is a common knowledge that the primary aim of damages for a contract breach in most cases is to compensate the plaintiff, and not the defendant. The compensation for pecuniary loses seems to be normal, but those compensations directed towards non-pecuniary losses like mental distress is still viewed with lots of doubt and uncertainty as to what extent such compensations can be undertaken (Turner & Martin 2004). The jurisdictions are not consistent in the decisions regarding this issue. In some cases, the courts apply the rulings against the awarding of damages of mental distress; but in some instances, the applied rules favor the award of mental distress as damage from a breach. These two different scenarios were seen in the cases of Groom v Crocker and McCall v Abelesz respectively. As a general rule by the contractual judgments, the damages for mental distress cannot be granted due to loss of a lucrative deal or loss of an employment opportunity (Elliott & Quinn 2011). Frustration A contract can be made and later the performance becomes impossible for one of the parties. In this situation, frustration is worth considerable based on subsequent impossibility. The availability of a full and complete clause of force majeur in the signed contract makes the application effective. In the absence of the force majeur clause, a keen look at the already established case laws is necessary. Under the case laws, if further performance is rendered impossible by the unavailability of one party due to death, illness or as a result of other exceptional situations, then frustration application is appropriate (Elliott & Quinn 2011). Conclusion The hotelier can receive the expectation loss and the reliance loss. The expectation damages are appropriate. The award for mental distress is not relevant in this case. Advice The hotelier should prove that the contractor was aware of the peak season. This will allow for compensations for both the ordinary and the extraordinary loss of profits as possible remedies. The presentation of logical figures is also necessary for the awarding of expectation loss. Bibliography Elliott, C., Quinn, F. 2011. Contract Law: UK Edition. (8th Ed). London: Trans-Atlantic Publishers Furmston, P. M.,Cheshire, C. G.,Fifoot, S. C.2006. Cheshire, Fifoot and Furmston's Law of Contract. (15th Ed). New York: Oxford University Press Turner, C., Martin, J. 2004.Unlocking contract law. London: Hodder and Stoughton   Appendix List of Statutes and Common Laws Sale of Goods Act of 1979 Supply of Goods and Services Act of 1982 Law Reform (Frustrated Contracts) Act of 1943 California Statutes of Limitation Clause Bisset v Wilkinson [1927] AC 177 Esso Petroleum v Mardon [1976] QB 801 Williams v Bailey (1866) LR 1 HL 200 Rodriguez v. Farrell, 280 F. 3d 1341 (11th Cir. 2002) Chapman v. City of Atlanta, No. 05-15505, 2006 U.S. App. LEXIS 20767 (August 14, 2006) Read More