Contract law:remedies available to Susan - Essay Example

?Contract Law: Remedies available to Susan Facts of the case in brief Susan suffered damages to her Jasmine Nursery due to spray of week killer by anemployee of SVCC. The paper seeks to analyze her case for possible remedies from SVCC or Point-Dux the manufacturer of the spray. Legal Premise/background of the case Under the doctrine of privity of contract, only the parties to a contract have rights or obligations under that contract. But, there are exceptions and remedies available to people as this principle may result into hardships in some cases. Contract law deals with the enforceable agreements, and the breach of contract causes damage. In the case of Susan, she has no contractual rights arising out of a pre-existing agreement. But, contract law encompasses any law or regulation directed toward enforcing certain promises, which could be implied in nature. Australian contract law is primarily regulated by the 'common law', but over the period of time statutes have increasingly been playing supplementary role in the common law of contract - particularly in relation to consumer protection. Implied terms of the contract should be given due consideration notwithstanding the fact that they have not been discussed by the parties or referred to in a contract. They may be implied at common law or by inference of the statutes. Nationally consistent implied terms regime have emerged in this area. Keeping in tune with the developments, schedule 2 of the Competition and Consumer Act 2010, previously named the Trade Practices Act 1974 of the Australian Consumer Law contains provisions in this regard. Damages for breach of contract can be viewed as a 'substitute' for performance. They are designed to address the hardships suffered and put the plaintiff in the originally intended position had the contract been performed. Punitive damages are not available in respect of contracts. The loss claimed must not be too remote from the breach and the non-breaching party must do what is reasonable to reduce (mitigate) the damage they suffer. Based on these grounds, this paper analyse the case to suggest the possible actions that could be taken by Susan against SVCC and/or Point-Dux for damages and the consequent financial losses. Points for discussion Having established the premise/background of the case, we need to analyze the background in detail with regard to the legal aspects concerning: Risks involved in the operations of SVCC (weed killer spraying) Turbulent winds as a cause for damages and its relevance Knowledge, capability and expertise of Wally, an employee of SVCC Negligence including contributory negligence Negligent misstatement Vicarious liability of the employer Legal position of the manufacturer, seller and buyer The liability for damages Analysis The risks involved in the operation are many-fold which includes health and environmental hazards. Study of various existing laws related to the case is essential to understand the government’s policy with regard to the use of chemicals, as it is very important to build up the case. For example, Proposal 18 (NICNAS, 2006, p.8) of the Existing Chemicals Program Review seeks to increase NICNAS’s legislative powers to ban certain high hazard/high risk industrial chemicals to aid in the protection of the Australian people and the environment. Therefore, in line with the government’s policy, the SVCC is expected to take necessary precautions and entrust the responsibility to an employee who is capable of handling the process without causing any damage to third party or the environment. Are the turbulent winds a part of the problem?  Wind turbulence is caused by the large trucks or tractors moving in great speed through the air. Displacement of air in such movements causes wind turbulence. Only the other passengers on the road may be nervous about the passing trucks due to its buffeting effect on their vehicles. This is normal in highways, and the persons experienced in this field are expected to take this factor into account while spraying to avoid the damages, and Wally has failed to exercise caution. The facts of the case clearly states that “The weather conditions are perfect for the spraying; However Wally did not consider the turbulent winds caused by the many heavy trucks which use the motorway. The spray is caught by these winds and deposited over a fence belonging to Susan’s Jasmine Nursery”. By way of prudence, he should have exercised more caution in spite of the fact that the instructions on the label claim that the weed killer will destroy all common weeds while leaving grass untouched which includes Jasmine Bushes, because in a sense his action amounts to ‘trespassing’ also as it involves interference with the property which results in actual harm. This signifies that he is not capable of comprehending the demands of the task entrusted to him in a reasonable manner, probably due to lack of requisite knowledge and experience, even if indifference on his part is not construed. Negligence in duty of care There is causal relationship between negligence and the damages caused. Negligence is a type of tort or delict. "Negligence" is not the same as "carelessness", because, in spite of exercising proper care as warranted under the circumstances, they may fall below the expected level of competence in performing the job. It could be considered as an opposite term of ‘diligence’ and refers to a conduct which falls short of performance, a reasonable person would do to protect others from the foreseeable risks of harm. The principles, ‘reasonably foreseeable’ and ‘proximity’ were clearly laid out with regard to interpretations of the law and precedents. The neighbourhood principle established in Donoghue v Stevenson was expanded in scope in the later cases to cover various forms of duties and situations. In Home Office v Dorset Yacht Co Ltd, Lord Reid observed that: "the time has come when we can and should say that it ought to apply unless there is some justification or valid explanation for its exclusion.”  It was also established in Anns v Merton London Borough Council and known as Anns test that: A sufficient relationship of proximity or neighbourhood exists between the alleged wrongdoer and the person who has suffered damage, such that carelessness on the part of the former is likely to cause damage to the latter; …There are no considerations relevant which may reduce or limit the scope of any imposed duty. But, the threefold test, ‘reasonably foreseeable’, ‘proximity or neighbourhood’ and ‘fair, just and reasonable to impose liability’ was firmly established in Caparo Industries Plc v Dickman. In Smith v Leech Brain & Co. (1962 QB), it was held that “The test is not whether these defendants could reasonably have foreseen that a burn would cause cancer and that S would die. The question is whether these defendants could reasonably foresee the type of injury which he suffered, namely, the burn. What, in the particular case, is the amount of damage which he suffers as a result of that burn depends on the characteristics and consti­tution of the victim. Accordingly, I find that the damages which the plaintiff claims are damages for which these defendants are liable. In the present case Wally has been negligent in his duty which resulted into damages to the Susasn’s nursery. While spraying, Wally did not consider the turbulent winds caused by the many heavy trucks which use the motorway. The spray is caught by these winds and deposited over a fence belonging to Susan’s Jasmine Nursery. In Hughes v Lord Advocate (163 HL) - liability found for workmen who left an open manhole surrounded by burning oil lamps unattended - one lamp fell in, exploded causing boy passing by to fall in and be burned - held that even though nature of accident was unforeseeable, foreseeable that someone could be burned by unattended lamps. (Tort Law, 2008). As long as the injury is foreseeable, it doesn’t matter whether it could be foreseeable to the full extent of the injury or not. Contributory negligence   Man and Roberts (2001, p.414) states “Contributory negligence is conduct on the part of the plaintiff (1) that falls below the standard to which he should conform for his own protection and (2) that is the legal cause of the plaintiff’s harm”. But usually courts reject contributory negligence as a defense. Section 6 (1) of the South Australian Law Reform (Contributory Negligence and Apportionment of Liability) Act, 2001 states that “A person who is liable in damages for harm suffered by another may recover contribution from a third person who is also liable in damages for the same harm”. The facts of the present case do not specify any act or omissions on the part of Susan to contribute for the damages caused. Pure Economic Loss Financial loss as a result of damages caused by a third party can be recovered. In Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” [1976] HCA 65, Caltex was successful in recovering its economic loss consequent upon the damage of its pipelines for carrying oil due to negligence on the part of Willemstad. The liability was based on foreseeability and proximity. A classic case similar to the present one is Perre v Apand Pty Ltd [1999] HCA 36. In this case potato produced with “non-certified” seeds was infected with bacterial wilt, and the grower was awarded damages for breach of implied conditions of the contract under the sale of goods legislation. Due to quarantine laws, the neighbours of the grower were not able to export their potatoes, because they were grown within 20 km of the known outbreak. The neighbours were successful in obtaining damages in High Court for the financial loss, though they could not sue for damages for negligence in respect of physical loss because there was no damage to this effect on the basis that physical harm is not a precondition to liability in negligence for economic loss. In the present case, there is physical harm as well as economic loss consequent upon the damages. (The University of Queensland) Negligent misstatement Liability towards negligent misstatement arises “Where statements proved to be inaccurate, chief among them being that statement makers assumed responsibility toward the third parties and or that the third party recipients relied, in a manner that was foreseeably likely, upon the accuracy of particular statements to their detriment” (Witting, 2000, p. 615). The possibility of liability by the maker of an inaccurate statement to third parties for economic losses caused by reliance upon that statement arose with the decision in Hedley Byrne v Heller and Partners. (Witting, 2000, p. 616) In the present case, the instructions on the label claim that the weed killer will destroy all common weeds while leaving grass untouched; this includes Jasmine Bushes (which in America are considered noxious weeds.). However, the spray has killed off half of Susan’s young plants and badly disfigured the remainder. Therefore, the instructions are misleading and constitute negligent misstatement. The manufacturer is liable on account of this negligent misstatement made by him with reference to the use of this toxic product. It is as an implied obligation to the public who use the product, arises out of this statement made by the company Point-dux, the manufacturer of the spray. Vicarious liability of the employer The employers are vicariously liable to third parties for the actions of their employees in the course of their employment. Latimer (2009, p.239) states “Defences for an employer include showing that they took reasonable steps to prevent employees or agents breaching the law and reasonable steps could include evidence of training and staff awareness”. In the present case, though the instructions are very specific by way of warning on the label, “Application must be by spraying. Spraying should not occur in windy conditions,” Wally has failed to follow the instructions. If the instructions could not be followed due to such conditions, he should be aware of the consequences and desist from carrying out the job or carrying out the job after taking necessary precautions to avoid any damages to the neighbour. If the injury or damages is caused by the independent contractor and not an employee, the contractor is liable for torts as they are treated as principals. Net Lawman states “The broad rule here is that an employer is not vicariously liable for the negligence of independent contractors. The way the law distinguishes between employees and independent contractors is rather complex. Very simply, an independent contractor, whilst working for the employer, is in a position to complete the task at hand in the manner he chooses. The employer cannot direct as to how the task is completed. Employees on the other hand, are completely under the control of the employer”. According to the facts of the case, Wally is an employee of SVCC and as such SVCC could be held liable for the actions of Wally which resulted into damages to Susan. Claim of indemnity by the employer from Wally is a different issue not relevant to Susan. The position is not altered even if Wally in this case is regarded as an agent, as the employer is liable for the agent’s actions. Legal position of the manufacturer, seller and buyer In July, 1992, Australia enacted a Product Liability Law that tracks the European Union's Product Liability Directive in all important respects. Previously, common law tort and contract principles governed compensation for loss or damage caused by defective products. The Australian law departs from the EU Directive on a couple of points. First, the Australian law provides a 20 year statute of repose, while the EU's Product Liability Directive provides a 10 year statute. Furthermore, the Australian law empowers the Trade Practices Commission to take representative actions on behalf of one or more consumers. (Bowman & Brooke, 1999). Wholesalers, distributors and retailers of products are under a duty to take care for the safety of consumers. This position is required due to the aspects such as inspection of the products, proper instructions for the use of the products and warnings with regard to usage. So many toxic chemicals are legal in Australia used for industrial and agricultural purposes. Failure to warn of the possible consequences of taking thalidomide was the basis upon which the marketer of that product was held liable for bodily injury in Distillers v Thompson (1971) UK. Especially, in the case of repackaged products or the products bought in bulk for distribution in small lots, the distributors or dealers of such products are treated as manufacturers and are subject to the same liability applicable to the manufacturers. Levenfeld (2008, P.II/332) states “If, at the time of the performance of an act by an agent, third party did not know of the existence of the agency or did not know the identity of the principal, the agent’s act bind the principal and the agent jointly and severally...” I the present case the manufacturers and the sellers or distributors are Point-Dux only, as the weed killer is made in America by Point-Dux, and sold by their Australian company. The liability for damages The cause and effect relationship though appears to be simple the causation between one's breach of duty in relation to the harm to another is very complicated, and aggravated by the circumstance available in a particular case. The factual causation is different in its scope from 'legal causation'. It is, in the words of Cardozo, J., liability in an indeterminate amount for an indeterminate time to an indeterminate class. Negligence may become ‘too remote’ to consequences according to an English case or not a ‘proximate cause’ in US, if it is not foreseen. The existence of relationship of proximity or neighbourhood is stressed upon with added emphasis by ‘sufficient’ in Caparo industries Plc v Dickman.  The establishment of foreseeabilty and proximate relationship is very critical, and it may exclude the physical harm occur due to negligence, if these conditions are not fulfilled. In the Susan’s case, though it could be established with reasonable certainty, evidences at every stage could play an important role. What is fair, just and reasonable to impose liability?  What is the yardstick to be used for measurement?   It leads to interpretations in different courts in different ways.  The assessment of the liability in these cases would be dependent upon the discretion of the judiciary for the simple reason that the terminology is so flexible and wide and the justice to the injured person would be impaired.  Conclusion According to the facts of the case, consequent upon the damages Susan is unable to provide Jasmine Bushes to her customers creating a serious financial loss for her business. Also she is unable to supply Jasmine Bushes for the display at the prestigious Coober Pedy Flower show. This show is where the majority of Susan’s future orders are generated. Susan has a fair chance of winning the case for damages based on the analysis, taking into account the pure economic losses as well, from SVCC as an employer of Wally whose action has resulted into damages and Point-Dux as a manufacturer and seller, since they are prima facie liable jointly and severally. However this is subject to the following points. 1. The instructions on the label claim that the weed killer will destroy all common weeds while leaving grass untouched; this includes Jasmine Bushes (which in America are considered noxious weeds.) Therefore, it should be tested to ensure that the jasmine bush has been damaged only due to spray and not by any other causes, and test certificate obtained from a competent authority. 2. As per the facts of the case ‘The spray is caught by turbulent winds and deposited over a fence belonging to Susan’s Jasmine Nursery’. Now, it is a question to be considered whether the spray deposited over the fence could damage the whole nursery. (Further details are not given). The Susan may have to obtain expert opinion in writing from an appropriate authority to ensure that this issue is covered effectively in the case. Also, quantifying the damages is dependent upon several factors including the following. Element of discretion: It is very important to note that there is enormous scope for the exercise of the discretionary powers by the judiciary in deciding the cases. Therefore, the technicalities related to the case should be made very convincing for the award of damages by producing proper evidences that may be required in the proceedings. Interpretation: There is risk of variations in interpretations with reference to law. The words and phrases such as sufficient relationship of proximity or neighbourhood and fair, just and reasonable are wide in meaning. This caution is applicable both to the plaintiff and the defendants. Evidences: Difficulties in providing evidences to the satisfaction due to terminology which is very wide in application and substantiation of the arguments results in less than normal liability or escape of the defendant from liability. Time factor: It is also important to note that the pure economic loss has some limitations and can be very unpredictable and differ with the time and place. Therefore, in view of the above constraints, if there is an opportunity for conciliation or out of the court settlement, Susan may give due consideration, of course, after collecting all the evidences that may be required in connection with the case. These evidences are required if the conciliation process fails, and this may be useful in the conciliation process as well. Self assessment of ‘Learning Objectives’ Application of law with reference to a particular case is aimed at in this analysis to obtain in-depth knowledge in respect of contract laws. The discretionary powers exercised by the courts in awarding damages should be taken into account carefully in analysing the cases, because, the question of law takes precedence over the facts of the case. The legal implications with regard to the vicarious liability of the employer need careful consideration. It is also very important to understand the technical details of the products and processes involved in the case to integrate it into the legal process, so that arguments advanced for the damages could be effective. Negligent misstatements about the products in relation to product liability laws should form a strong basis for the damages. Computation of pure economic loss should be reasonable and convincing for the claim to be successful, because at the end of the day, it is the opinion of the judges which carry more weight in the court verdicts, which is based on the justice, fairness and reasonableness. References Bowman & Brooke, L. L. P. (1999). International Product Liability Laws, Find Law. Retrieved January 5, 2011, from http://library.findlaw.com/1999/Aug/1/129312.html Latimer, P. (2009). Australian Business Law (28th ed.). CCH Australia Ltd. Levenfeld, B. (2008). International Agency and Distribution Law [2008] Volume II. Campbell, D. (Ed.) YorkhilLaw Publishing, Mann, R. A. & Roberts, B. S. (2001). Essentials of business law and the legal environment. West Publishing Company, Eagan. Net Lawman. Vicarious Liability, Retrieved January 5, 2011, from http://www.netlawman.com.au/info/vicarious-liability-australia.php NICNAS. (2006, April). Promoting safer chemical use: towards better regulation of chemicals in Australia. Retrieved January 5, 2011, from http://envirohealth.berkeley.edu/cached%20files/EC_Review_Discussion_Paper_PDF.pdf South Australian Government (2001). Law Reform (Contributory Negligence and Apportionment of Liability) Act, 2001. Retrieved January 5, 2011, from http://www.legislation.sa.gov.au/LZ/C/A/LAW%20REFORM%20(CONTRIBUTORY%20NEGLIGENCE%20AND%20APPORTIONMENT%20OF%20LIABILITY)%20ACT%202001/2005.09.30_(2001.08.16)/2001.41.PDF Tort Law (2008). Australian Tort Law Terms, 30 Sep 2008. Retrieved January 5, 2011, from http://www.tortlawcases.com/ University of Queensland Law Reseach Series (2009), Barker, Kit – “Economic Loss and Duty of care: A Study in the Excercise of Legal Justification” [2008] UQLRS 1; (2008) Justifying Remedies in the Law of Obligation Hart. 5 Jan 2009. Retrieved January 5 Jan 2011, from http://www.austlii.edu.au/au/journals/UQLRS/2008/1.html Witting, C. (2000). Justifying Liability to Third Parties for Negligent Misstatements. Oxford Journal of Legal Studies, Vol. 20, No. 4, pp. 615-643. Read More