The Contract between Surflife Ltd and Punked Jeans Pty Ltd - Case Study Example

? Department of Business Law and Taxation Solution A: The contract between Surflife Ltd and Punked Jeans Pty Ltd (PJ) reflects a mutual agreement on the orders placed by the Surflife Company and the terms of delivery of the goods to the company by the PJ Company. Surflife Company requested for the order of 15000 pairs of jeans to be delivered on the 1st day of April, 2011 from the PJ Company. PJ Company in response to the order stated its terms that mentioned the order number, the date of delivery as well as the total cost of the order that was $225,000. The terms were also accepted by the Surflife Company and they replied through an email with their expression of happiness with the terms. Although there was no exchange of any other terms, the two parties could be understood to be in terms of an agreement and involved in a contract. However, the problem had arisen in the delivery on part of the PJ Company owing to a mistake occurred by one of the employees of the company who was responsible for the supply of the goods to the customer. The employee, not following the instructions properly, got the wrong orders ready for shipment and supply. The number of jeans supplied was 12,000 instead of 15,000 and another set of orders were also supplied that the buyer company had never requested for. Moreover he proved to be careless in the packing of the goods that suffered damage later in the process. When the goods were finally delivered to the company, it was delayed and the majority of the goods were destroyed in rain and ill-treatments of the suppliers. Thus after suffering a huge loss, the company was not willing to pay for the goods to the PJ Company. The question that arises here deals with the rights and obligations of the PJ Company and how the dissatisfaction of the Surflife Company could be addressed and resolved. According to the Sale of Goods Act (1979), sections 13 and 14 state that if goods are contracted to be sold by description, then the buyer has the rights to receive the goods as have been described by the seller in the contract, particularly if the buyer has not examined the goods before the contract was entered into by the two parties. As section 13(1) state, “Where there is a contract for the sale of goods by description, there is an implied condition that the goods will correspond with the description”1. It can be understood in this case that the Surflife Company had ordered the pairs of jeans but had not examined the goods before entering into the contract. The contract of the sale of goods in this context was thus a sale by description. The goods that were delivered to the Surflife Company did not match with the description of the goods stated in the contract by the PJ Company. Hence a violation in the contract could be seen to have occurred and Surflife Company in this scenario had the rights to sue the seller company. Being the seller company and one of the parties to the contract where the order was clearly stated along with the date of delivery and the size of the order, PJ Company had certain rights and obligations in regard to the delivery of goods to the customer. The seller had the rights to dispose of goods if all conditions are not fulfilled on the part of the buyer or owing to other circumstances (sec 25(1)). The seller company might consider the goods to have been delivered if the buyer expresses acceptance or if the goods are retained by the buyer company without giving any further notice (sec 24). Moreover, the seller had the rights to supply the goods only when the buyer demanded for it (sec 35) and such goods may also be supplied in installments (sec 39(1)). The seller may keep hold of the goods till the payment procedure is completed (sec 47(1)) and in the process the company might have hindered the process of shipment or transportation of the goods and regain it after payment is done (sec 49(2), sec 50). The goods might also be resold by the seller company depending on circumstances (sec 54). Also, the company could sue the buyer company if the later showed any breach of conduct (sec 55)2. Along with the rights a seller company, in this case the PJ Company, also possesses certain obligations towards the buyer company on entering into a contract. The seller company was supposed to deliver the goods to the customer in agreement to the terms of the contract that was entered into by both the parties (sec 31). Also, the goods are required to fulfill all implied conditions. The description (in case of sale by description) and the agreed quantity of the goods to be exactly the same during the delivery are also the duties of the seller (sec 37(1)). Most importantly, the goods are needed to be in a deliverable state when they reach the customer3. Thus the PJ Company in this case can be found not to fulfill its obligations in terms of maintaining the terms of the contract. Neither the exact orders were supplied, nor were they supplied in a deliverable state. Also, certain orders were sent along with the same that were not even requested by the buyer company. Moreover the order reached the Surflife at a much delayed state than what was contracted in the agreement. The case suggests that the seller company, PJ Company, was unable to perform its obligations in the delivery of goods to the buyer company, Surflife Ltd. Although the fault might be of one employee who did not follow the instructions correctly, but the obligation was of the company as a whole. In this scenario, the buyer company might sue the seller company for the losses that incurred to the Surflife Company as a result of the faults of the supplier company. In order to resolve the situation, the supplier company needs to admit and accept its fault and try to compensate the buyer company for the losses they suffered. This would at least revive the relationship between the two companies that is necessary for further businesses to pursue between them. Moreover, the PJ Company should take measures to be more careful in dealing with their orders such that they do not dissatisfy their customers or incur them losses. For the present case to be resolved, the PJ Company would require to address the complaints of the buyer company and compensate for their losses. Solution B: The Surflife Company was found to send a similar note to the carrier service, Feilong Transportation Pty Ltd., as well implying no payment for the losses the company had suffered. The liability with the carrier company arises in that the company did not take utmost care in the handling of the goods while they were being transported from the warehouse to the container to the truck and finally to the ship. Had the handling method given sincere concern, the sealing of the container would be done properly not leading to a mishap on the goods that got damaged as a consequence. The process of packing and reloading the goods again were all performed in the rain that eventually got stained and incapable of being used. Thus the company, that had huge demands in the market, had to suffer losses in the light of unavailability of the desired goods. However, in regard to the carrier company or the shipment facilities of the company in transporting the goods to the buyer company, the liability of the company does not exist. This is owing to two primary reasons. Firstly, in the international commercial law of business, section 338 of the navigation act reflects that a ship owner would not be liable to compensate for any loss for which he is not faulty directly. Goods may be damaged owing to several reasons but a ship owner would not compensate for the loss if he is not responsible himself. However, even if the carrier is found to be accountable for any loss to the buyer company, then they are required to compensate up to a certain amount that has been set by the International Monetary Fund with some conditions applied to the process. For example, this act would not apply if the carrier purposely demolishes or damages the goods4. Secondly, in the particular case study that deals with the issues arising out of a seller company being unsuccessful in supplying its customer, presents that the carrier company had already passed its bill of lading, that is the contract document containing the information on the goods, the quantity and other details of the transportation of goods by the sea across the globe5, where it mentioned clearly that the company would not be responsible for any delay or damage whatever the cause might be. Also, if they are supposed to compensate for any damage that amount would not exceed an amount more than US$100. Thus when the Surflife Company acted similarly against the carrier company as it had done with the supplier company, it can be realized that the carrier company would not be liable to an extent to which the PJ Company had been liable. Moreover the carrier company was not directly into a contract with the Surflife Company. Rather, Feilong Transportation Pty Ltd. was dealing with the PJ Company to transport over the seas. Thus the carrier company was not directly involved in the deal implying that the company was not accountable to compensate for the losses directly to the Surflife Company. However, since the carrier company was to a large extent responsible for the damage of the goods, thus, the Surflife Company may ask for compensation and the carrier company would need to compensate for the losses for which they were themselves responsible. The amount that the carrier company may have to pay to Surflife would depend on the extent of the losses made to the goods and depending on several conditions, would be determined by the International Monetary Fund. Thus the case reflects that the business laws are applicable when two parties have mutually with free consents entered into a contract that clearly mentions the terms and requirements of the parties. The buyer would request for a good or service and the seller would provide the customer with the requirements. In the process if a third party is involved he may not be directly responsible to compensate for any mismanagement or losses if not contracted to do so. In this case, the carrier company was hired by the PJ Company to deliver its products to Surflife, a reason why the carrier company was not directly contracted to the buyer company. Even if it was held responsible for the mishap, it would have to encounter the supplier company and compensate for the losses, if any. Thus the liability of the carrier company was much less in comparison to the supplier company which was directly contracted with the Surflife Company. The business laws play a crucial role in determining the measures that need to be considered when such issues like failure in the fulfillments of any conditional contracts that has been entered into by two or more parties. As the above case suggests, when a party is unsuccessful in fulfilling the terms of the contract he may have to compensate for the loss if he is directly involved and responsible. On the other hand, if a third party is indirectly involved in the deal but not in the contract, he would either is not liable at all or liable to a very small extent. Depending on the scenario, different measures can be undertaken by the parties to the contract. References 1) Bradgate, R & F. White. (2007), Commercial Law, Oxford: Oxford University Press 2) Giermann, H.A. (2004), The Evidentiary Value of Lading and Estoppel, Germany: LIT Verlag Munster 3) Rights and Duties of Seller. (n.d.), Tax4India, available at: http://www.tax4india.com/indian-laws/business-commercial-law/sale-of-goods/rights-of-seller.html (accessed on September 21, 2011) 4) Zeller, B. (1999), International commercial law of business, New South Wales: Federation Press Read More