Contract Law: Facts of Alans - Case Study Example

(A) Brief Facts of Alan's Case ASL agrees to supply an oven for the kitchen in Alan's new restaurant in Castlerea. The oven is to be installed at the restaurant in time for the grand opening on 1st November 2008. Due to terrible weather nearly all the roads leading to the restaurant are flooded. Under such circumstances ASL decide not to deliver the oven at that time. Alan does possess a small oven but he deems that it would be inadequate for the particular use. As a result, Alan's restaurant cannot open until 5th November, when the oven finally arrives. As a consequence, Alan loses 15,000 on advertising, 7,000 on advanced bookings and 8,000 prospective profit from a wedding party who wanted to take over the whole restaurant for one night. My advice to Alan would be that his case involves the principles of Performance of Contract and the Breach of Contract and then in the next stage the subsequent calculation of damages. (a) Standards of Contractual Duty : The general rule is that performance of a contract should be precise and exact. A party performing an obligation under a contract must perform that obligation exactly within the time frame set by the contract and exactly to the standard required by the contract. Whether the alleged performance satisfies this criterion is a question to be answered by construing the contract, so as to see what the parties meant by performance, and then applying the ascertained facts to that construction, to see whether that which has been done corresponds to that which was promised. If there is a slightest deviation from the terms of the contract, the party not in default will be entitled to say that the contract has not been performed, will be entitled to sue for damages for breach, and, in certain cases, to elect to be discharged(Re Moore&Co. and Landauer & Co.)(1) It can be said that only if the deviation is microscopic will the contract be taken to have been correctly performed, for de minimis non curat lex(2) A party who does not render precise and exact performance of a contract is nevertheless exceptionally treated as having performed to some extent where that party has attempted(tendered) performance but the other party has prevented that performance, and in certain cases where there has been partial performance of an entire obligation. In Alan's case ASL had a contractual duty to supply the oven on time as per the terms of the contract, something they didn't do. It was not that they could not have performed it as it was not an impossible task to perform. It was rather that they chose not to do it. Stipulations as to time for performance in Contract Law : Where a time was fixed for performance of an undertaking by one of the parties to the contract, the common law as a general rule held this to be 'of the essence of the contract'. This phrase is often used but is capable of causing confusion because the question relates not to the contract as a whole but to the particular term that has been breached.(3) If the condition as to time was not fulfilled, the other party might treat the contract as broken and elect to terminate it.(4) For instance, in a contract for the sale of a flat where time was slated to be of the essence, the vendor was entitled to terminate when the purchaser tendered the price 10 minutes late.(5) In Alan's case 'time was an essence of the contract' Everything at Alan's end depended on him getting the timely supply of the oven from ASL. Discharge of Contract by Breach : If one of the two parties to a contract breaks an obligation which the contract imposes, a new obligation will in every case arise - an obligation to pay damages to the other party in respect of any loss or damage sustained by the breach. Besides this, there are circumstances under which the breach not only gives rise to a right of action for damages but also gives the innocent party the right to decide not to render further performance under the contract and to be discharged from its obligations.(6) In principle, an innocent party who does not 'accept' the repudiation is entitled to continue to insist on performance because the contract remains in full effect.(7) An innocent party who adopts this course is sometimes said to have elected to affirm the contract, although the right to claim damages for the breach is still retained. ASL breached the contract by their non-performance but Alan chose to continue with the contract albeit ASL supplying him the oven quite late and as a resultant Alan suffered loss of earnings as well as reputation. According to the above discussion Alan has not lost the right to sue ASL for damages. Damages : Damages for breach of contract are designed to compensate for the damage, loss or injury the claimant has suffered through that breach. In 'Alfred McAlpine Construction Ltd. v. Panatown Ltd.'(8) it was ruled that damages can be claimed for physical loss. But damages can also be claimed and recovered for substantial physical inconvenience or discomfort arising from the breach.(9)(20) Damages can also be claimed for loss of reputation that caused financial loss to the claimant. 'Malik v. Bank of Credit & Commerce International S.A.'(10) So, I will advise Alan to sue ASL for 15,000 on advertising, 7,000 on advanced bookings and 8,000 prospective profit from a wedding party who wanted to take over the whole restaurant for one night. (B) Brief Facts of Barbara's Case : ASL undertakes to build a special shower unit for Barbara at her home (ASL also previously supplied and fitted a kitchen and bedroom wardrobes in the house). Due to the negligence of one of the workmen the tiles are not fitted properly and Barbara slips and breaks her knee as she enters the shower. Barbara is very annoyed and is unable to use her bathroom for the next two weeks until the repairs have been completed. ASL refuse to accept liability and point to a clause in the contract which states that 'ASL are not liable for any damages or injuries howsoever caused'. My advice to Barbara would be that ASL couldn't refuse to accept its liability in such a brazen manner. Barbara suffered injuries and her bathroom got damaged by the faulty workmanship of a workman who was in employment of ASL. The Contract of Agency comes in to play here. A may represent or act on behalf of B, with B's authority, for the purpose of bringing B into legal relations with a third party. The relationship thus constituted is called agency.(11) Actual authority to contract may be expressed or implied. Normailly the authority given by a principal to its agent is an express authority enabling the latter to bind the former by acts done within the scope of that authority. ASL has the vicarious liability for the tort of its workman. It is based on the general principle "Qui facit per alium facit per se" which means that the act of an agent is the act of the principal. For any act authorized by the principal and done by the agent both of them are liable. Their liability is joint and several. The authority to do the act may be express (12) or implied.(13) As far as the second part of the contract is concerned where ASL has pointed to a clause containing a term absolving it of all or any of the liability for damage or injury will not hold water in the light of Unfair Terms in Consumer Contracts Regulations 1999. According to it a term will be 'unfair' where, 'contrary to the requirement of good faith', it 'causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer'. So my advise to Barbara would be to sue ASL for an action for damages on the count of physical injuries caused to her and the delay in the execution of the contract due to the fault of ASL. (C) My advice to Charles would be that he is not liable to pay anything to ASL and in fact he can sue ASL for damages as they have breached the terms of the contract. Charles gives ASL an order for building a garage. He gave the order to ASL on the basis of representation made by ASL that they are 'the specialists' when it comes to designing and building garages. It was a condition of the contract between Charles and ASL and insisted by Charles that the garage must be the latest model known as the 'SuperBeckham Garage II' Charles apparently agreed to the cost of the garage charged by ASL also. In fact, ASL have never designed garages. ASL orders the garage from another supplier. It is delivered shortly afterwards, but when it is half-erected both ASL and Charles discover that the garage is an earlier model known as 'SuperBeckham Garage I'. At this stage ASL decide to terminate the contract because they have been offered more lucrative work elsewhere. ASL demands that Charles pay them for the work that they have already completed. The contract between ASL and Charles has not been performed precisely and exactly by ASL. ASL has in fact made major deviation from the contractual terms. If there is a slightest deviation from the terms of the contract, the party not in default will be entitled to say that the contract has not been performed, will be entitled to sue for damages for breach, and, in certain cases, to elect to be discharged In 'Re Moore&Co. and Landauer & Co(14). D agreed to buy from P 3,000 tins of canned fruit from Australia to be packed in cases containing 30 tins. When the goods were tendered it was found that a substantial part of the consignment was packed in cases containing 24 tins. D was entitled to reject the whole consignment. Even if the performance effected is commercially no less valuable than that which was promised, there is a default in performance'. 'So a contract to ship goods direct from Singapore to New York was held not to have been performed by shipping them to the American Pacific Seaboard and thence to New York by train'.(15) So in the light of the above discussion it can be said that ASL deviated from the terms of the contract from the very beginning and thus the contract is voidable at the instance of Charles. Secondly, since ASL breached the contract by not performing it strictly according to the terms of the contract, they have half erected the model of the garage that was not even ordered and they have also left the work mid way to look for another lucrative assignment elsewhere. If one of the two parties to a contract breaks an obligation, which the contract imposes, a new obligation will in every case arise - an obligation to pay damages to the other party in respect of any loss or damage sustained by the breach. Besides this, there are circumstances under which the breach not only gives rise to a right of action for damages but also gives the innocent party the right to decide not to render further performance under the contract and to be discharged from its obligations.(16) In principle, an innocent party who does not 'accept' the repudiation is entitled to continue to insist on performance because the contract remains in full effect.(17) An innocent party who adopts this course is sometimes said to have elected to affirm the contract, although the right to claim damages for the breach is still retained. ASL breached the contract by their non-performance now its upto Charles if he asks them for further performance. Charles can sue ASL for damages if any pre-decided amount has been mentioned in the terms of the contract and if it has not been mentioned then Charles can sue ASL for non-performance and the cost Charles would incur for first dismantling the older version of the garage and then getting the newer version installed in its place. In fact, Charles can file a suit against ASL for Specific Performance. An order for specific performance is one by which the courts direct the defendant to perform the contract, and in accordance with its terms. End Notes Read More