The Law of Contract - Essay Example

GENERAL PRINCIPLES OF LAW/ THE LAW OF CONTRACT (A) "The courts are not easily convinced that a given change of circumstances is of sufficient gravity to frustrate a contract". Discuss. Frustration of contract can be defined as a prevention from continuation of a contract when the employee who is employed under the contract becomes unable to perform the work for which he was employed due to reasons beyond control by both parties (employer and employee). When the employee is no longer able to engage in any further employment and that makes it impossible for a contract to be performed further, the said contract of employment is said to be frustrated and comes to an end. The doctrine of frustration of contract may apply in the circumstances as the following Prolonged illness of the employee; The employee concerned becomes incapable to perform duty due to an accident or illness; The employee concerned was under police detention or custody for infinite period of time; and The professional licence for the employee concerned to practise a particular profession was revoked. It is the incumbent on the employer to prove that the employee's absence or incapacity was of such a nature that further performance of his obligations in the future would be either impossible or a thing radically different from that undertaken by him to perform. The doctrine of frustration applies in the same way when a workman is physically or mentally incapacitated. In such cases, the workman would be entitled to be paid termination benefits under the Regulations 4 of the Employment (Termination And Lay-Off Benefits) Regulation 1980 and all statutory benefits due to him under the relevant legislation. Therefore, illness of an employee may operate to determine the contract if the illness is such as to interfere materially with the proper performance of the contract. On the other hand, a mere temporary illness will not so materially affect the employee's ability give personal service and, therefore, will not entitle the employer to dismiss the employee. The court affirmed that it was only in the case of a very serious sickness which may be considered as an event sufficiently fundamental to frustrate the contract and to give the employer the right to immediately dismiss the employee concerned on the grounds of disability. The incapacity or illness should not be temporary, but it should be serious and prolonged that the employee cannot be expected to perform his duties in the foreseeable future. In such circumstances, the employer has the right to terminate the employee's services. However, terminating the services of any employee while he is still on sick leave is an unfair labour practice. In the case of employee under police detention/custody, it is settled law that detention by police is a reasonable excuse to be absent from work. It is the finding of the court that absence from work due to arrest by police without any fault of the claimant is not misconduct and should not lead to his dismissal by applying provisions of S.13 (2) and S.15 (2) of the Employment Act 1955.In any event simply not being present at work is not per se a frustrating event, especially the time concerned was of short duration. If the company relies on the frustration of contract, it is for the company to establish that the employee's absence was of such duration that further performance of his obligations in the future is impossible. Thus, a contract of service may be frustrated if it is established that the nature of work so performed is critical to the operation of the company and the absence of the employee concerned is of a duration or nature that further performance of his duties under his contract of service in future would be impossible. The critical nature of work performed in relation to company's operational requirements and the expected or probable duration of absence from such work will be the deciding factors in establishing whether there is frustration of contract or otherwise. (B) In this case, the two parties involved are Fred and George. A quick overview of this case entails that Fred and George have entered into a contract, however the contract could not be ascertained. A detailed description of the case is required in order to advise Fred on further plans of action. Fred and George entered into a contract, whereby Fred agrees for the installation of water systems in the housing estate being built by George. The only condition in the contract is the time constraint. Fred agreed to complete the work assigned to him on December 1st 1991 provided George starts his work by 1st January 1990.However, George delayed in starting his work due to which Fred was not able to complete his entire work in the estimated time-period. Fred is no were responsible for the delay caused by George. Fred protested about the delay but attempted to complete the work in accordance with the contract. It is to be noted here that Fred "attempted" or tried to complete the work in order to be in lieu with the contract ,however, he did not "promise" to do so. Thus, the terms of the contract remains unchanged. A full view of all the circumstances states that Fred is liable for the payment on the work completed by him. Looking at the legal considerations, we see that the courts have made exceptions to the rule of making payment only on full completion. Under these exceptions, payment for part can be claimed :- -> Where one party has accepted partial performance of an entire contract -> Where one party has prevented the total completion of the contract -> Where there has been a substantial performance of an entire contract. In this case, Fred is liable to the payment under the third exception i.e., substantial performance of an entire contract. When a contract has been substantially performed but not entirely performed, the party performing will be entitled to some payment for the work done. However, all the circumstances which lead to the partial completion of the work has to be considered before deciding on the payment. The circumstances results in only conclusion which states the defect has been from George's side as he delayed his work by two months due to which Fred had to start his work late because of which he could complete only three quarters of the work assigned to him. In Hoeing Vs Isaacs (1952) the court held that since there have been a substantial performance of the contract, the employee was entitled to full contract rate, less the cost of defects. Since there is no mention of the defects in the work of Fred in this case, Fred is entitled to the entire payment on the work completed by him. (C) A general view of this case reflects the fact that there exists no contract among the parties. As the general notation, is for a contract to come into existence it requires the following activities - offer and acceptance, legal consideration, capacity and competence of the parties, free and genuine consent, lawful object, certainty and so on. However, this is not the complete truth. A contract is a "promise" or "agreement" that is enforced or recognized by the law. Contracts may be classified on the following basis : -> On the basis of Validity. Voidable contract Void contract and Unenforceable contract -> On the basis of Formation. Express contract Implied contract and Quasi contract -> On the basis of Performance Executory contract and Executed contract In this case, the contract comes under the second classification i.e., here the contract has come into existence on the basis of formation. It is an implied contract. An implied contract is the one which is implied from the behaviors of the parties and not by expressed words, spoken or written. Here in this case the two parties include the seller and the consumer. Harry the sandwich bar owner is the seller and Ian, John and Kate his consumers. There has been a breach of contract from Harry's side as after consuming the sandwiches made by him Ian, John and Kate have fallen sick due to which they have suffered from losses and damages in their personal workings. They could not continue with their respective works for two weeks as they were bed ridden. Is Harry liable to these damages caused Yes, to a certain extent. The normal remedy for breach of contract is an action for damages. It is an obvious fact that not all loss is recoverable, however it is necessary to establish how much is the loss/damage suffered as a result of the breach. If the loss is not caused by the breach it is not recoverable. A detailed view about the loss faced by each of the consumer involved in the case is required in order to advise Harry of the likely liability for damages for breach of contract. Ian is retired, spends time resting and reading. The only loss he had suffered is due to being bed - ridden he has neglected his garden. There have been no mention about the loss caused to the garden and there is no proof which states if at all there has been any loss to the garden it is because of the negligence of Ian. John is an independent sales representative who claims earning 500 gross at an average weekly. Because he had fallen sick after consuming the sandwiches he could not work for two weeks. Thus there have been a monetary loss of an average 1000 to John. Kate is an upcoming actress, while buying the sandwich from Harry, she told him that she is going for an audition for a new West End Musical the following day, however, because of being ill she misses the audition and the musical performance turns out to be a major hit and got transferred to Broadway with the original cost and is now being filmed. Though it is difficult here to calculate the monetary loss faced by Kate, it could be well concluded that her illness riped her off a good start to her career. In all the three cases the loss caused can be classified under consequential or incidental loss. The violator may suffer equally foreseeable but less immediately obvious loss as a result of the breach. So defective goods supplied under a contract may damage people or property and losses following unfair dismissal may extend to pension rights, free health insurance, a company car, etc. These kinds of damages are 'incidental' to, or arise as a 'consequence' of the breach. In Jackson Vs. Chrysler (1978), damages were awarded for consequential loss. Here, in this case assuming that the damages caused or loss incurred to all the parties is due to illness which is traceable to the sandwiches and ultimately the fault lies with Harry, he would be liable for the compensation. Here the compensation Harry need to bore will be providing for the medical charges if at all being claimed by the parties as the loss is of consequential or incidental type and moreover the loss caused could not be accurately estimated in monetary terms. (D) 1) Is there a contract between John and Jane, trading as Square Deal Electronics, and Mary If so, when did it come into being A contract is a "promise" or "agreement" that is enforced or recognized by the law. A contract comes into existence when it satisfies basic requirements like involvement of minimum two parties, offer and acceptance , mutual understanding between the parties and an activity between the involved parties. All these requirements are found in the given case i.e., there is an involvement of two parties - John and Jane on one side and Mary on the other, then there is offer and acceptance the offer being the good sold, Easy Walker Alarm and the acceptance being the good purchased, and activity being the sales transaction held between the involved two parties. Thus we can conclude that there exists a contract between John and Jane, trading as Square Deal Electronics and Mary. This contract came into existence when Mary purchased a Easy Walker Alarm from Square Deal Electronics. The contract formed between these two parties could be termed as an implied contract. An implied contract is the one which is implied from the behaviors of the parties and not by expressed words, spoken or written. 2) What are the terms of this contract Now that it is relevant that there exists a contract between John & Jane and Mary, the terms, conditions and warranty involved in this contract could be traced down. Well the terms would be : -> Mary would pay for the Easy Walker Alarm purchased. -> John & Jane, would obviously hand over the Easy Walker Alarm as soon as she pays its price. -> The price would be 55 as it was listed on the product which was publicly displayed. -> The product sold must be in a working condition. This is again a condition. Moreover, this is an implied term under the Supply of Goods and Services Act 1982. -> There has been another term laid down as guarantee of the product sold. Mary was given a guarantee stating that Square Deal Electronics would replace, free of charge any faulty equipment or part, provided it being returned or reported within six months of purchase. -> This condition was further extended stating that Square Deal Electronics is not liable for faulty equipment or for any damage or injury resulting from the use of their product. 3) What was the effect of the Guarantee given by Square Deal Electronics One of the term or condition clearly laid down in the contract between John & Jane and Mary is the one related to guarantee of the product being sold - Easy Walker Alarm here. When Mary bought the easy walker Alarm from Square Deal Electronics , she was given a guarantee stating that they would replace, free of charge, any faulty equipment or part, if returned or reported to them within six months of purchase, but would accept no further liability for faulty equipment or for any damage or injury whatsoever arising from its use. The very next day, due to a fault in the Easy Walker Alarm, it got overheated and caught fire resulting in a huge damage to furniture, clothing and some of Mary's personal possession. As per the guarantee being given by the Square Deal Electronics they would replace the Easy Walker Alarm or might even give a new piece to Mary as it was badly damaged and also it was reported the very next day the purchase was made. However, Mary could not claim Square Deal Electronics to pay for the losses caused to her due to the fire mishap caused by their product as they clearly states in the guarantee that they would not accept no further liability for faulty equipment or for any damage or injury arising from the use of their product. Thus, the effect of guarantee provided by Square Deal Electronics could not prove to be beneficial for Mary. 4) What damages would Mary possibly recover as a result of the incident, if any As per one of the term in the contract, related to guarantee, Square Deal Electronics would replace the damaged Easy Walker Alarm with a new one. If Mary has insured all her possessions against fire then probably she could retrieve the amount incurred on all the damages caused by fire from the insurance company. 5) If Mary decided to pursue an action to recover damages, in what court would she start her action and Why As per the Consumer protection Rights, it is an offence for a supplier to sell goods unless they are safe. This applies to both new and second-hand products, but not to antiques or to goods needing repair or reconditioning, providing one is clearly informed of this fact. Mary have bought unsafe goods and so she should contact the trading standards department of the local authority at the earliest as prompt action may help prevent accident or injury to other customers 6) Would the position be any different if Jane was Mary's mother and Jane had served her when she bought the Alarm Under the statutory rights of consumers, the clause for gifts or presents states that "if you received the faulty goods as a present, you may have to ask the person who bought them to complain for you, or to authorise you in writing to complain on his or her behalf. Only the buyer has the statutory rights described earlier". Thus, in this case Jane must ask Mary to complain for her, or to authorise Jane in writing to complain on Mary's behalf. REFERENCES : -> Collins Hugh, July 2003: The Law of Contract. Read More