Contract Law - Megatractors Plc - Essay Example

?CONTRACT LAW of Contract Law Contract law stipulates that parties to a contract should face liability if they breach the contract. Generally, a contract dictates that a party has a duty to perform certain duty under the contract, and therefore if he does not perform should face liability (Fafinski and Finch, 2009, p. 14). So, whenever one party identifies that the other has not performed the duty as per the terms of the contract, he has a right to sue for injuries or loss suffered as a result of the failure of the other party to perform the duty. However, the claimant has the evidentiary burden to proof that he was ready to perform his duty while the other did not do so. Since a breach of contract implies that one of the parties to a contract has suffered a loss or injuries, the law requires that the other party pay for damages to the injured party. Award of damages to the injured party is the major remedy which is available at common law for breach of contract. In general terms, damages refer to the monetary sum that is determined by the court in order to compensate the injured party. Damages intend to restore the injured party to his previous financial position (Beatson and Burrows and Cartwright, 2010, p. 39). In the scenario presented, Megatractors plc has suffered loss as a result of the crashing of the vehicle which was carrying its equipment. Megatractors plc had contracted the services of the Ace Transport Ltd to transport an expensive harvester to a customer, Home Farms (Flempton) Ltd. Since Ace Transport Ltd had provided similar services to Megatractors for a number of years, the latter was convinced that the former will perform its duty as per the contract. However, this did not happen as the driver’s error caused the vehicle carrying the equipment to crush and badly damaging the equipment thereby causing loss to Megatractors. After the incident, Ace Transport Ltd advised Megatractors that it intends to rely on the following clause: “Ace Transport Ltd will not accept any liability for loss or damage caused to customers’ property during transportation, no matter how the loss or damage was caused. Customers are advised to take out their own insurance.” Ace Transport further points out that the clause had been prominently displayed outside the entrance to their main offices, and is also reproduced on the back of all i9nvoices, confirmation of order notices and the receipts of the company as required under the Unfair Contract Terms Act 1977 (Stone, 2009, p. 71). In the light of the facts relating to Megatractors scenario and the laws regarding the contract, the Managing Director of Megatractors plc should first be aware of the situation’s legal position. Megatractors plc has indeed suffered a substantial loss considering that the equipment which was damaged was described as expensive. As such, the company is ideally supposed to sue in order to recover substantial damages. Inherently, Megatractors plc can sue for special damages because it has suffered a quantifiable monetary loss; in this case damaged equipment. In addition, the company has suffered direct losses in the form of economic or consequential losses as a result of lost profits. Since it has been identified that; the crushing of the vehicle carrying the equipment was due to driver’s error, Megatractors has a right to sue for both punitive and compensatory damages for the tort that was committed resulting to the loss it has suffered (Fafinski and Finch, 2009, p. 20). The damages sought will intend to restore Megatractors plc to the position that it was at before the crushing had taken place. It is paramount for Megatractors plc’s Managing Director to know that in order to recover the substantial damages that it has suffered; it has to show that it had actually suffered the loss it is claiming. In this case it has suffered two types of losses: incidental loss due to the damaged equipment caused by driver’s error; and consequential loss due to the lost profits that the company expected from the sale of the equipment (Elliot and Quinn, 2003, p. 35). The court usually award damages to injured parties based on two major considerations: remoteness of the cause and the measure of damages (Peel and Treitel, 2011, p. 111). Fafinski and Finch (2009, p. 105) explains that award of damages is subject to the principle of law that states that the loss or injury suffered must be proximately caused by the negligence or wrongful act of the defendant. The principle of proximate cause governs the awarding of compensatory damages. This principle provides that damages awarded will be limited to those that were foreseeable to the defendant. This implies that if the defendant had not foreseen that somebody was likely to suffer loss or injury due to his actions then there will be no liability, and consequently the question of damages would not arise (Elliot and Quinn, 2003, p. 35). The second consideration is the measure of the damages or what is often known as the quantification of losses. This consideration requires that the damage or the loss that the claimant is claiming to have suffered should be measured or quantified in monetary terms. In doing this, the services of experts such as accountants are often sought. It should be noted that the main purpose of this consideration is to compensate the claimant and not to punish the defendant. Also, the damages are not restitutionary but rather compensatory. In other words, it intends to put the claimant into similar financial position that he would have been if the contract would have been performed properly. As noted in the case of Victoria Laundry v Newman industries, Megatractors plc can sue for the profits that it suffered because the equipment was not delivered as agreed in the contract. As has been noted above, Megatractors plc have an option of suing for either or both the incidental or consequential losses in order to be awarded compensatory damages. However, the Managing Director of Megatractors plc should be well aware that the clause that is displayed outside the entrance of Ace Transport’s main offices, and reproduced on the back of all invoices, confirmation of order notices and the receipts by the company can be the impeding factor in his pursuit for remedies. This clause has the potential of denying Megatractors plc compensatory damages. This is because it can be considered that before Megatractors plc entered into contract with Ace Transport Ltd; it was aware of the clause as it had been prominently displayed outside the entrance and reproduced on the back of all receipts, confirmation of order notices, and invoices. That notwithstanding though, the Managing Director of Megatractors should know that all is not lost and that there are some legal options that can be pursued in seeking remedies for the loss suffered. The clause inserted by Ace Transport Ltd intends to limit its liability in an event of a loss. In the United Kingdom laws, such clauses which seek to restrict the rights of other parties in a contract is known as exclusion clauses and is contained under the Unfair Contract Terms Act 1977 (Lawson, 2011, p. 51-2). The type of exclusion clause that Ace Transport Ltd inserted is called true exclusion clause; this clause acknowledges that there is a possibility for a breach of contract thereby excusing itself from liability for the breach. Basically, exclusion clause outlines the kind of liability that the company is specifically refusing in a contract. In this case, Ace Transport Ltd had outlined that it will not accept any liability for loss or damage caused to customers’ property, no matter how the loss or damage was caused. The company has gone further to point out that since it will not accept any liability for loss or damage; customers should take out their own insurance in order to compensate them in an event of loss or damage. Insertion of exclusion clause by Ace Transport Ltd does not entirely restrict Megatractors from all the rights that it is entitled to in the contract. Most cases that relate to contract law have shown that the court often take approaches that are not likely to a party can entirely avoid liability especially that which arise as a result of negligence. In the case of Canada SS Lines Ltd v The King, it was held that in an event the term “negligence” has not been mentioned then a party is not excluded if the words used are not wide enough to exclude negligence (Fafinski and Finch, 2009, p. 254). It was also note that the clause will not apply if the words used are ambiguous. Therefore, since the clause does not explicitly mention the term “negligence”, Ace Transport Ltd will be sued for negligence and damages sought. This will be way of pursuing incidental losses. In addition, it will be advisable for the Managing Director of Megatractors to pursue damages for direct loss of profit in a bid to recover lost profits as a result of damaged equipment. Whereas the clause has mentioned that Ace Transport Ltd will not be liable for losses suffered, the English courts have in some cases attempted to classify this kind of loss in different category. In the case of Pegler Ltd v Wang UK, the court held that loss that Wang UK had excluded did not exclude liability for all losses of profits but consequential and indirect profits (Lawson, 2011, p. 147). The court argued that words such as “any” can limit the scope of such clauses and it is imperative that a party specifies the types of losses for which he is not accepting liability in advance (Beatson and Burrows and Cartwright, 2010, p. 92). It is against this background that Megatractors plc should sought damages for direct loss of profit since it had not been specified in the clause. Since there is sufficient evidence, there is high possibility that Megatractors plc will be awarded compensation for direct loss of profit. Bibliography Beatson, J and Burrows, A, and Cartwright, J, 2010, Anson's Law of Contract, Oxford: Oxford University Press. Elliot, C and Quinn, F, 2003, Contract Law, Longman. Fafinski, S and Finch, E, 2009, Law Express: Contract Law, Longman. Lawson, R, 2011, Exclusion clauses and unfair contract terms, London, Sweet & Maxwell. Peel, E and Treitel, G, 2011, Treitel on the Law of Contract, Sweet and Maxwell. Stone, R, 2009, The Modern Law of Contract, Taylor & Francis. Read More