The Complete Builders Ltds Contracts with MacroHard Computers, Ricky, and George - Essay Example

?Law of Contract The Complete Builders Ltd (CBL) forms three independent contracts with MacroHard Computers (MC), Ricky and George. Ricky Introduction This problem deals with a claim for breach of contract, and the legal principles dealing with a claim for breach of contract and in particular relating to misrepresentation. Issues In order to advise Ricky regarding his rights against the CBL company, the issues to be addressed are; Whether the statements made by Lawretta, during negotiations, constitute misrepresentation under the provisions of the contract law. Whether there is a breach of contract by CBL, under the provisions of contract law. Whether CBL can claim for breach of contract against Ricky for non – payment of money for the work completed. Rule of Law A false statement of fact, during the formation of a contract, by one of the parties to the contract, constitutes misrepresentation. As per the provisions of the Misrepresentation Act 1967, the representor is liable for fraudulent misrepresentation, despite his not having made the statement fraudulently.1 The party to the contract that undergoes loss due to this misrepresentation can either revoke the contract or claim damages.2 Application Ricky’s contract with CBL involves the construction of a new conservatory. Lawretta, a director of CBL, assures him that they are the best in constructing conservatories and that he was at liberty to make relevant enquiries. Ricky believes her statement and agrees upon a cost of ?20,000 for constructing the conservatory. After the completion of half the work Ricky discovers that CBL had never constructed conservatories. In addition, he comes to know that some of CBL’s former customers are claiming damages for defective and poor workmanship. Ricky refuses to pay CBL for the work completed and the latter decides to claim for breach of contract. The statements made by the parties to a contract, which result in the formation of the contract, constitute terms or representations. The intention of the parties, determines whether a statement is to be classified as a representation or a contractual term. The court deems a statement to be a term, if the parties had specified that it was to be considered a term. For instance, in Derry v Peek, their Lordships ruled that in such cases, it was sufficient if the plaintiff could establish that the defendant knew or was convinced that his statement was not factual.3 In Redgrave v Hurd, the plaintiff had made a statement regarding his firm’s income, while attempting to induce the defendant to become a partner, in his business. Hurd discovered that the statement was wrong and sought to rescind the contract. The lower court ruled in Redgrave’s favour, but the appellate court set aside this decision and held that Redgrave’s statement constituted innocent misrepresentation. Thereafter, it upheld the revocation of the contract by Hurd.4 A plaintiff is not liable for breach of contract if he had been unaware of the misrepresentation, at the time of the contract. This was the ruling in Horsfall v Thomas.5 Moreover, in Smith v Chadwick, the court ruled that there was no liability if the plaintiff had been aware of the misrepresentation and it was established that this knowledge could not have influenced his judgement.6 Finally, it was held in Peekay Internmark Ltd v Australia and New Zealand Banking Group Ltd that there had to be actual knowledge of the misrepresentation and that constructive knowledge was insufficient.7 It is essential for some relationship to exist between the misrepresentation and the inducement for the claimant to form the contract. Thus, in Attwood v Small, the defendant had relied upon his agents’ report regarding the productivity of the mines and steelworks offered to him by the plaintiff.8 As he had not relied on the plaintiff’s statement, he was not permitted to rescind the contract. Conclusion The fraudulent misrepresentation made by CBL induced Ricky to hire the former to construct a conservatory. CBL had misrepresented to Ricky about its experience in constructing conservatories and the superior quality of its construction work. Finally, it became evident that all the statements made by the director of CBL were false, and that several other customers had also filed claims against CBL for damages. Hence, Ricky can claim damages under section 2 of the Misrepresentation Act, 1967, for the losses resulting from the false description and inducement made by CBL. However, CBL can claim compensation for the portion of the work completed under the provisions of the Contract Law. George Introduction This problem concerns a claim for breach of contract, and the validity or otherwise of exclusion clauses and notices of exemption, in contracts. It also discusses the validity of exclusion clauses in instances involving personal injury due to negligence. Issues The issues to be addressed are; Whether the negligence of CBL’s employee make CBL liable for breach of contract. Whether the CBL company can resort to an exclusion clause for evading a breach of contract action. Rule of Law Exclusion clauses in contracts are governed by statutes like the Unfair Terms of Consumer Contract Regulations 1999 and the Unfair Contract Terms Act 1977. The latter Act renders a business liable if it fails to fulfil the duties or obligations that are necessary in the normal course of business. The provisions of the Unfair Contract Terms Act 1977 set aside any exemption clause that seeks to prevent or restrict liability for breach of sections 12, 13 and 14 of the Sale of Goods Act 1979.9 Liability for causing death or personal injury due to negligence is disallowed by the Unfair Contract Terms Act 1977. In addition, this Act precludes restriction or exclusion of liability for negligence whose outcome is loss of damage, until and unless the exemption clause of notice is reasonable.10 Any attempt by a party to a contract to avoid liability for breach of the statutory conditions, specified in sections 13, 14 and 15 of the Sale of Goods Act 1979 is precluded by section 6(2) of the Unfair Contract Terms Act 1977. Moreover, section 6(3) of this Act stipulates that any exemption clause in a contract has to comply with the requirement of reasonableness. Application George forms a contract with CBL to construct a shelving system in his house. The latter had previously fitted wardrobes and a kitchen in George’s house. This contract had a clause that the work was subject to the usual terms and conditions of CBL. The negligence of one of CBL’s workmen results in the collapse of a shelf containing valuable pottery. In addition, George trips on a loose floorboard and fractures his leg. CBL does not accept liability, by relying on an exclusion clause in the contract. It is commonplace for service providers and manufacturers to avoid liability for negligence, by incorporating exclusion clauses in their contracts or by providing suitable notices, in this context. A consumer is usually not in a position to contest such terms, as he requires the goods or services. As a measure of relief the Unfair Contract Terms Act 1977, prohibits the exclusion of liability for negligent behaviour leading to death or personal injury. It also prevents circumventing of liability for negligent behaviour whose outcome is loss or damage, if the exemption clause or notice of exemption is not reasonable. 11 In accordance with the above discussion, CBL cannot circumvent liability on the basis of exclusion clauses. The latter are ineffective, whenever personal injury or damage to property takes place. This is as per the provisions of the Unfair Contract Terms Act 1982 and the Unfair Terms in Consumer Contracts Regulations 1994. Conclusion Consequently, George can claim compensation for the losses caused by the defective workmanship of CBL, under the provisions of the Supply and Goods and Services Act. In addition, George can claim damages for losses caused to him by the negligent services provided by CBL. The latter cannot evade liability by stating that it is not responsible for the misrepresentation made by its employee. As per the above discussion, CBL is liable for the misdeeds of its employees under the principle of vicarious liability. Moreover, CBL cannot evade responsibility for any losses, by relying on exclusion clauses, since George had suffered an injured foot and lost valuable pottery. MacroHard Computers Introduction This problem deals with a claim for breach of contract, and the legal principles dealing with a claim for breach of contract and in particular relating to inordinate delay in completing the contract and liability for the loss caused due to such delay. Issues Issues In order to advise MC in respect of his legal rights the following issues are to be addressed; Whether Time is the essence of the contract. Whether there is any breach of contract by CBL in respect of MC. Whether MC will have any legal rights to make against CBL for the losses caused by it. Rule of Law The Sale of Goods Act 1979, allows a party to a contract to rescind the contract, if the other party fails to complete a contractual obligation, within the specified time, in contracts where time is of the essence.12 Accordingly, in contracts where time is of the essence, delay attracts cancellation of the contract.13 It is not necessary for it to be specified that time is of the essence of the contract. The presence of contractual terms that indicate the importance of time is sufficient, and some of these may state that delivery dates are important or that time is of the essence. 14 Application The condition time is of the essence is included in some contracts. This implies that the contractual obligations have to be completed, without fail, within the stipulated time. Failure to complete these obligations in time constitutes a breach of contract.15 CBL is liable for breach of contract under the provisions of Sale of Goods Act 1977 for violating the implied terms in respect of quality and fitness for the purpose.16 There is no necessity for a contract to specify that time is of the essence. In general, a contract comprises of several terms that clearly indicate that time is central to the contract. Some of these conditions are a contractual term that stipulates time to be of the essence of the contract or that the date of delivery of goods is central to the contract. Strictly speaking, it is incumbent upon the parties to a contract to complete their contractual obligations within the time specified in their contract.17 In our problem, CBL forms a contract with MC to construct an extension to the latter are office, at a cost of ?150,000. Moreover, MC had recently expended ?60,000 on advertisements that promoted their increased efficiency, on account of the new facilities. Of this amount, ?20,000 had been spent before forming the contract with CBL. A delay of 6 weeks took place, as glass of the required size had not been used. MC had corresponded with the Delboy Glass Company, so as to obtain replacement glass, which did not elicit any response. MC underwent losses, on account of the failure of the CBL to complete the contractual obligation within the stipulated time. Conclusion In our problem, as per the discussed case law, CBL cannot evade liability for delay since time is essence of the contract. Relying on the contract with CBL and expecting the work to be completed within the stipulated time; MC had entered into many lucrative deals with others. Due to the delay caused by CBL in not using glass of the proper size, MC had to forego many profitable deals with other parties despite its efforts to solve the problem by approaching another company. CBL is liable for breach of contract under the provisions of Contract Law. MC can make a claim for damages against CBL for breach of contract and loss of profits. Bibliography Cases Attwood v Small (1838) 6Cl & F 232 Derry v Peek (1889) LR 14 App Cas 337 Horsfall v Thomas (1862) 1 H&C 90 Peekay Internmark Ltd v Australia and New Zealand Banking Group Ltd (2006) EWCA CIV 386 Redgrave v Hurd (1881) Ch D 1 Smith v Chadwick (1884) 9 AC 187 Smith v Eric S Bush (1990) UKHL 1 Statutes and Statutory Instruments Misrepresentation Act 1967 Sale of Goods Act 1979 Unfair Terms of Consumer Contract Regulations 1999 Unfair Contract Terms Act 1977 Books Barnes P and Davies M, Sub contracting under the JCT 2005 Forms (John Wiley and Sons 2008) Wright D, Law for Project Managers (Gower Publishing Ltd 2004) Websites ‘Time of the Essence’ (March 2009) accessed 5 October 2011 Read More