Remedies On and Off Contract - Essay Example

Contract Faculty The areas of law in which the problem falls There are three different scenario presented in the case with three different forms of damages to the company AAA with three different companies LLL, CCC and PPP specifically focusing on misinterpretation and common understanding in first case, written contract and satisfactory quality and fitness for purpose of goods and services in second case and of law. 2) The relevant issues involve within the problem The first scenario has three main issues applicable; misrepresentation, Negligence misrepresentation and SGSA satisfactory quality and fitness for purpose (s4) in the hiring of limousine from AAA. The second case has three areas of laws in which problem falls are Breach of Contract, expectation loss and entitlement of claim for loss when CCC delivered wrong computers which resulted loss to AAA. The third case deals mainly with legal principles of incorporation, construction, contra proferentem rule, negligence and limited clauses in the third case where AAA delivered nearly 50% poor quality photographs. 3) Main legal principles relevant to the issues All three cases are of Contract. The basic principle of contract law is "[t]he purpose of the law is to put the plaintiff in as good a position as he would have been in had the defendant kept his contract." 1 Similarly contract liability is, "Contract liability is strict liability . . . The obligor is therefore liable in damages for breach of contract even if he is without fault" 2 Case 1 Misrepresentation: Misrepresentation is an unambiguous statement of material fact made prior to the contract by one party to the other which induced the other party to enter into the contract. Principle of Incorporation: Within this principle, specifically the concept of mutual understanding is applicable which is “derived from the conduct of the parties that the conduct of hire was to be based on one of the party’s usual conditions’. 3 Case 2 Breach of Contract: Breach of contract happens if any of the party involved in the contract does not fulfil its conditions. Expectation loss: This is the loss which non breaching party was expected to get in the case when contract was not breached. Entitlement of claim for loss: When the reason for the breach is justifiable or not, if not justifiable than claimant can claim for loss. Case 3 Principles of incorporation: Contra proferentem rule is applicable when part or whole of a contract has ambiguity. Negligence: "the negligence of one party has caused pecuniary loss to others, and the damages are foreseeable" 4 4) Application of the law to the specific issues Case 1 The first issue in the first scenario is whether or not the words “excellent reputation for being reliable” constitutes a misrepresentation, due to the fact that LLL were unreliable by arriving late and sending a limousine that was not clean and up to the mark. This was a common understanding developed that the service will be of good quality and presentable. The above statement could be seen as a mere puff (sales talk) which is not considered to be a statement of fact as courts would treat such as idle boasts with no contractual significance as in Dimmock v Hallet where the statement “Fertile and Improvable” was considered to have insufficient substance to be classed as a representation. Also the statement could be seen as an opinion as in Economides v Commercial Union Assurance Co Plc (1997) where estimate of content given to the insurance was considered to be a statement of opinion as he was not an expert thus not a misrepresentation. On the other hand, the above statement could be considered as opinion of a person in a better position to know the facts in which case it is misrepresentation as in Smith v Land & House Property Corporation where it was held that a statement of opinion from someone who knows the fact best is a statement of fact as the knowledge of fact justify the opinion. Furthermore, the statement was made by one party to the other i.e. LLL to AAA and if Lynda relied and acted on the statement to make her decision to give the contract to LLL, although the statement was not the only reason as she compared prices and found them to be cheaper, but she could sue LLL even if the statement was not the only inducement for entering into the contract as long as it influenced her decision as in Edgington v Fitzmaurice where it was held that a misrepresentation need not be the sole cause of entering a contract so long as it is an influence. LLL might try to argue that they provided reference and that Lynda should have checked the references before entering into the contract but chose not to by taking their word for it, however the misrepresentation will still be considered an inducement even if Lynda was given an opportunity to verify the truth but chooses not to as in Redgrave v Hurd where failure to verify the truth of a statement did not prevent the claimant from suing for misrepresentation. The second issue in the first scenario is whether or not LLL words that the limousine was in excellent condition constitute a misrepresentation because the limousine was in bad condition when it arrived. The second issue is similar to the first issue, LLL are in position to know if the limousine was in excellent condition or not, although they could argue that by saying excellent condition they were referring to the working condition of the car and not the interior, this could be seen as half –truth where a statement even though is the truth gives a misleading picture of the whole fact as in Nottingham Patent Brick & Tile v Butler where the solicitors lack of awareness was a result of his failure to read relevant document but was still regarded as misrepresentation. So also it was a statement made by one party to the other as above and the said party relied and acted on the statement to make her decision to give the contract. The third issue is whether or not AAA can claim damages from LLL for picking up the guest late and for the condition of the limo under negligence misrepresentation. Lastly, claim for damages under the Act would be assessed on the same basis a fraudulent misrepresentation. Case 2 The second scenario deals mainly with the legal principles of damages and specifically loss and expectation loss. The first issue in this scenario is whether or not AAA can get the full £300,000 from CCC as a result of the Breach of contract. The legal principle concerned with this issue would be reliance loss. Reliance loss is a wasted expenditure due to reliance on a contract, this can be claimed where loss in profit it is speculative and impossible to quantify, reliance loss sort to put the innocent party in the position they would have been, if the contract had never happened as in the of Anglian Tv v Reed where it was held that there was no reason why cost incurred prior to the contract could not be recoverable provided that they are not too remote. In this instance, AAA have spent £300,000 on advertisement in applying the principle above, AAA may or may not recover the full amount of £300,000 but may recover the £100,000 that was spent prior to entering the contract. So also it is necessary to established that the loss although caused by the breach is not too remote as not all losses caused by breach are recoverable. By applying the principle of remoteness of damages as in Victoria Laundry Ltd v Newman Industries where it was held that only losses which were reasonably foreseeable could be recovered, CCC could argue that as it was a new product, it is reasonably foreseeable that AAA would advertise prior to the launch. The second issue concerns whether or not AAA can recover £800,000 loss of profit from CCC as a result of breach of contract. The legal principle concerned with this issue would be expectation loss. Expectation loss is loss of profit due to breach of contract, this aims to compensate the claimant for what they expect to gain from the contract and to put them in the position they would have been, had the contract been performed. As in Simpson v London and North Western Railway Co where it was held that held that loss of profit was as a result of failure to deliver samples on time, so also AAA lost three orders which was certain could have made a profit of £800,000 as this has already been determined in the contract with the retailers. The third issue is whether or not AAA is entitled to claim £900,000 from CCC for loss of opportunity as a result of the breach of contract. The legal principle applicable to this would be speculative damages which are expectation loss that are speculative and difficult to quantify as demonstrated in Chaplin v Hick where it was held that the actress could recover part of what she could have earned if had she had gotten the job. By applying the above principle, AAA may not get all £900,000 as it is highly speculative and not certain as any contract had been signed yet however they may be able to get part of the money as compensation for the lost opportunity. Case 3 The third scenario deals mainly with legal principles of incorporation, construction, contra proferentem rule, negligence and limited clauses. The first issue in this scenario is whether or not the exception clause is incorporated in the event of AAA wanting to sue for breach of contract. According to the principle of common law, for an exception clause to be valid it has to satisfy three tests, it must be a term of the contract (incorporated) at the time of contract by signature, reasonable notice, course of dealing, common understanding or reference to another document. It must cover the damage that was caused and must be reasonable. In this scenario, it is safe to say that the clause was incorporated by signature as there was a signed contract between AAA and PPP , as in L’Estrange v Graucob where it was that signed document. However the contra proferentem rule is applicable as the clause mentioned by PPP does not clearly mentions the percentage of error possible that would help the client in appropriate decision making. 5) Conclusion This case covered different scenarios of business and contract. In the first case, it is not clear if any written documents were provided. In conclusion, AAA should be able to sue LLL for misrepresentation as the statements made by LLL prior to the contract was not ambiguous was a statement of present fact, was false, induced Lynda into entering the contract and was not a term of the contract which are the basic principle of a misrepresentation as well as for not meeting the requirements of common understanding under principle of incorporation. Negligence misrepresentation is when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true. In negligence misrepresentation claimant can sue under common law when tort can be established, only reasonably foreseeable losses can be recovered following the principle of Hedley Byrne v Heller , the burden of proof is on the claimant, no contract is required between the parties but a special relationship is required. Since there is a contract between AAA and LLL, the statutory claim under section 2(1) of the Misrepresentation Act 1967 would be the best as the onus is on LLL to prove that they did not misrepresent. The remedies available for misrepresentation depends on the type that occurred, in this instant the remedies applicable to negligent misrepresentation will be Rescission and/ or Damages. Remedies can also be available on the basis of common understanding as in the case of British Crane Hire Corporation Ltd v Lpswich Plant Hire Ltd (1997). Rescission is an equitable remedy, which sort to put the contracting parties into the position that they would have been if the contract had never existed at all. However there are exception to its availability, such as damages in lieu of rescission as in section 2(2) misrepresentation Act 1967 which could be used in this case as the court may consider that damages in lieu of rescission could provide better remedy. Conclusively, AAA may be able to succeed in getting all or part of their loss from CCC if they can prove that the losses were incurred due to the wrong delivery of the computers. References Barry N (21997), "13 Fault and Breach of Contract*," Good Faith and Fault in Contract Law, ed. Jack E. Beatson andDaniel E. Friedmann (Oxford: Clarendon Press, 1997) 337, Battye, A. and I. Roberts,(1995) eds. 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