The Contract between Bruno and Luigi - Case Study Example

156120 The starting point is to consider whether the contract between Bruno and Luigi is binding. Under contract law once there has been an offer and an acceptance of that offer a contract is duly created. Any attempts by either party to prevent performance of the contract would be classed as a breach of the contract. The doctrine of an anticipatory breach1 centres on a party either renouncing the contract before performance is due or disabling himself from performing the contract before it is due to be performed2. In Bradley v Newsom Sons & Co the Lords came to the conclusion that there had been no abandonment of the ship by the master without any intention of returning to her, and without hope of recovery, so as to entitle the cargo owners to treat the contract as at an end, and to claim possession of the cargo without paying the freight and that the letter of the owners conveyed no intimation of an intention no longer to be bound by the contract. Similarly in Universal Cargo Carriers Corp v Citati the judges held that the charterer, by putting it out of his power to load the cargo within the lay time prescribed, had committed a further breach of the charter party; but that none of the breaches committed were breaches of condition and therefore the owners were not ipso facto entitled to rescind. Renunciation requires a clear and absolute3 refusal to perform. In the Hermosa that Nitrates should have continued to press for definite information as to the owners' and M.T.C.'s intentions; and if they had waited they would have realized that they could not have cancelled the charter. This renunciation can take the form of conduct indicating that the party is unwilling to perform, even if he is able to perform. The conduct must be such the other party believes that the renouncing party is about to commit a breach. If there is an indication given to a third party of an intention to commit a breach at an unspecified time in the future this would not amount to a renunciation4. Laughton and Hawley v BAPP Industrial Supplies it was held that the industrial tribunal had erred in law in holding that an intention to compete in the future with their employers expressed by the employees in letters to their employers' suppliers was in itself a breach of the duty of loyalty owed by the employees to the employers; and that, accordingly, the employers were not justified in dismissing the employees and their dismissals were unfair Bruno could argue in this case that Luigi should be bound by the terms of the contract. However, had Luigi been aware of the Government ban on the use of genetically modified tomatoes in bottled and canned food products he would not have entered into the contract with Bruno. The Government issued the ban in August 20003 and the contract was entered into in November 2003. In this particular case the courts are likely to uphold the contract as Luigi had the opportunity of discovering the ban. The courts would probably decide that the fact that Luigi did not know of this is no defence as he had the opportunity of discovering this. Luigi could attempt to argue using the Sale of Goods Act 1979 s14 that the tomatoes are not fit for their purpose as they are not able to be used in canned or bottled products which is what he intended to do with them. Using this argument the court may well allow Luigi to rescind the contract, which would mean that Bruno would not be able to force Luigi to but the tomatoes When looking at the second part in respect of the quality of the goods Luigi might be able to rely on Sale of Goods Act 1979 s14 again as there is an implied condition that the goods sold shall be of a satisfactory quality and fit for a particular purpose5. In Barber v NSW Bank Ltd it was stated that that the term in question was undoubtedly a condition as it was fundamental to the agreement that NWS retain property in the car until all moneys due were paid in full. It therefore followed that B was entitled to rescind the agreement and recover the deposit and instalments. Where the goods are deemed to be of unsatisfactory quality the buyer has the right to reject the goods6. There are certain occasions where the right to rescind for breach of condition does not apply7. This restriction would apply where the buyer is not dealing as a consumer and where he would be entitled to reject by reason of a breach of condition implied into the contract. In these cases if the seller can show that the breach is so slight that it would be unreasonable8 for the buyer to reject the goods the breach is not to be treated as a breach of condition but may be treated as a breach of warranty9. By treating it as a breach of warranty the buyer’s remedy would then be in damages. As Luigi is trading as a consumer he might not be able to rely on the Sale of Goods Act as mentioned above, however he would be entitled to reject the tomatoes on the grounds that there has been a breach of the implied condition of the goods as stipulated in the contract. The Supply of Goods (Implied Terms) Act 1973 introduced a definition of merchantable quality which was added to s14(6) of the Sale of Goods Act 1979 which states (6) Goods of any kind are of merchantable quality above if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied o them, the price and all the other relevant circumstances. On the face of it it would appear that there has been a breach of warranty as the tomatoes are not fit for the purpose intended. S14 lays does the rules regarding quality etc and from the information given the tomatoes are obviously not as described and are worth less than half the originally agreed price. If the seller indicates to the buyer that the goods will be suitable for the express purpose then the seller will be liable if the product does not meet the expected standard10. In Balmoral Group Ltd v Borealis (UK) Ltd the court found that on the evidence the claimant had failed to establish that borecene was not reasonably suitable for the purpose of making oil tanks by rotomoulding in that it was incapable of being used to make satisfactory oil tanks. On the contrary the court accepted the evidence of an expert witness that borecene was fit for that purpose and that a competent rotomoulder would be able to produce tanks from borecene with acceptable wall thicknesses. If, as the claimant had submitted, borecene was intrinsically defective, then the court would have expected to see a more widespread failure pattern With the third situation where supermarkets are refusing to sell goods that have been genetically modified there is no way that Luigi could have discovered this before entering into the contract with Bruno as the contract was made in November 2003 and the supermarkets made their decision to stop selling these items in January 2004. This would mean that Luigi should be able to cancel his contract with Bruno as the goods he is supposed to be buying from him cannot be used by him. Bruno could attempt to persuade the courts to order specific performance of the contract as he was not aware at the time of making the contract with Luigi that the goods he was about to grow would be banned from sale in the supermarkets. He could rely on the fact that he has spent a considerable amount of money on buying the seeds and the greenhouses in reliance on the contract he had with Luigi. When looking at all of the above situations the general rule in contract law is that if one party to the contract has committed a breach the other party will have a remedy in all cases. In some cases the damages awarded might only be nominal but this is usually only the case where the injured party has not suffered some form of loss as a result of the other party’s breach. Most breaches of contract are remedied in the form of damages, though the courts have the power to order specific performance where applicable. Damages are awarded on the basis of putting the plaintiff in the same situation as if the contract had been performed. When awarding damages the courts require the plaintiff to take reasonable steps to mitigate their losses. The courts will also consider the remoteness rule. Under this rule the plaintiff cannot recover any unusual loss unless the possibility of such a loss as contemplated by the parties when they made the contract11. In British Westinghouse Electric and manufacturing Co Ltd v Underground Electric Railways Co of London it was held that, as the substitution of the other party’s machines went in mitigation of the damages consequent on the breach of contract, the railway company were entitled to recover from the Westinghouse Company the price paid for the other party’s machines; and none the less because the other party’s machines were so superior to those of the Westinghouse Company that it would have been to the pecuniary advantage of the railway company to have effected the substitution at their own cost even if the machines supplied had been in accordance with the contract. Under s50 of the Sale of Goods Act it states (1) where a buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance (2) the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of the contract. (3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of the refusal. This would entitle Bruno to be able to claim the amount that he was expecting to receive when the contract was fulfilled. As there is no market for the goods in part (a) above or part (c) due to the ban by the Government in respect of part (a) and the supermarkets in respect of part (c) this would mean that Bruno should be able to claim the full amount from Luigi as he cannot mitigate his losses by selling the goods elsewhere. In respect of part (b) Bruno would not be able to claim the full amount as the goods are only worth 50% of the agreed price due to the fungus that has attacked the crops. In this case Bruno would be entitled to claim 50% of the sum agreed on the contract. If Bruno had breached the contract by failing to deliver the goods then Luigi would be entitled to use s51 of the sale of Goods Act 1979 to claims damages against Bruno. When considering the remoteness aspect of a claim in damages the courts will look for evidence that the losses where within the contemplation of the parties. In the case of Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 the defendants, an engineering company, agreed to sell a boiler to the plaintiffs, who ran a laundry, not knowing that the plaintiffs intended to use the boiler to fulfil some highly lucrative government dyeing contracts. The boiler was damaged while it was being dismantled for transport to the plaintiffs, and it was delivered late. The plaintiffs claimed for loss of profit on the dyeing contracts. Streatfield J refused the plaintiffs any damages for loss of profits. In the Court of Appeal Asquith LJ pointed out that the degree of knowledge about what losses are likely will vary from one context to another. The court decided that the defendants had not been told about the dyeing contracts and could not be expected to know of them, but it must have been obvious that in all probability the buyers wanted the boiler for immediate use in their laundering business. The courts held that the defendants were not liable for the loss of the dyeing contracts but should be liable for the amount of profit the plaintiffs would have made using the boiler for normal laundering. They were awarded damages for the loss of normal profits12. In Cory v Thames Ironworks Co it was held that the plaintiffs were entitled to the amount lost, as the damages which the defendants must be taken to have contemplated would result from the non-performance of their contract. Bruno might have difficulty in relying on this to claim for the losses he has incurred as it could be argued that the fungus attacking the crops was not within the contemplation of the parties and nor was the banning of genetically modified produce by the supermarkets or the government. The conclusion that can be drawn from the above is that Bruno should be able to claim damages against Luigi for the breach of the contract or might be able to obtain an order for specific performance. Bruno is unlikely to claim damages relying on the remoteness factor as none of the above events could be within the contemplation of the parties. He should however succeed on the breach alone and would be entitled to the full amount as he is unable to mitigate his losses. Bibliography Treitel, G H, The Law of Contract, 10th Ed, 1999, weet and Maxwell Beale, HD, Bishop, WD, Furmston, MP, Contract Cases and Materials, 3rd Ed, 1995, Butterworths Civil Procedure Volume 2, The White Book Service, 2002, Sweet and Maxwell Rose, FD, Statutes on Contract, Tort & Restitution, 10th Ed, 2000, Blackstone’s Civil Procedure Volume 1 2002, Sweet & Maxwell Harvey, b & Marston , J . Cases & Commentary on Tort, 1998, 3rd Ed, Pitman Publishing Mozeley & Whiteley’s, Law Dictionary, 1993, 11th Ed, Butterworths Treitel, G H. Law of Contract, 1999, 10th Ed, Sweet & Maxwell Table of Cases Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 1900 [2006] 2 Lloyd's Rep. 629 [2006] 2 C.L.C. 220 Barber v NSW Bank Ltd [1996] 1 WLR 641 Bradley v H Newsom, Sons & Co [1919] AC 16; British Westinghouse Electric and manufacturing Co Ltd v Underground Electric Railways Co of London [1912] AC 673. Cory v Thames Ironworks Co (1868) LR QB 181. Laughton and Hawley v BAPP Industrial Supplies [1986] ICR 245 The Hermosa [1982] 1 Lloyd’s Rep 470 Universal Cargo Carriers Corp v Citati [1957] 2 QB 401 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 Table of Statutes Sale of Goods Act 1979 Supply of Goods (Implied Terms) Act 1973 Read More